Former finance minister Daim Zainuddin's resignation will erode the investors' confidence in the country's administration and result in further dips in the already-slumped stock market, said an economist today.

"Investors are likely to interpret this as an indicator of Prime Minister Dr Mahathir Mohamad's inability to hold the confidence of an important minister," said the source on condition of anonymity.

Last Saturday, Prime Minister Dr Mahathir Mohamad announced that Daim had relinquished his posts in the cabinet and Umno. This brought an end to widespread speculation that Daim's two-month leave since April signified his soon-to-be resignation.

Following that, Daim had flown to his hometown in Alor Setar, Kedah, and has yet to say anything about his resignation. However, it was learnt that he will talk to the press when he returns to Kuala Lumpur tomorrow.

As Daim's resignation came at an inopportune time where the country's economy is burdened with various problems, particularly the American slowdown, the government is expected to increase government expenditure and to encourage public spending, said the economist who is working for a local investment company and has been keeping track on stock market performance.

"The economy is in the midst of a slowdown. Unemployment is going to be high with the recent spate of retrenchments.

"The electronics industry has come to an end. The information technology industry has not taken off after the much-publicised Multimedia Super Corridor (MSC) project was launched," the source added.

The economist predicted that Daim's replacement would hardly bring about any changes in Malaysia's economic policy, saying, "the next (finance) minister is going to be another Mahathir loyalist. Malaysia is still going to be a pro-market economy, with little concern for distributional considerations, or for the needs of labour."

Although Mahathir has not named the new finance minister, political pundits are quick to point out that several candidates who have been lying low for the past few years may make a comeback, such as Tengku Razaleigh Hamzah who led a splinter group called Semangat 46 in 1989 but dissolved it seven years later to rejoin Umno.