By Shuli Ren
Barron’s Asia
August 26, 2015

Malaysia’s Prime Minister Najib Razak turned to the 1998 currency peg “old guards” to stabilize the sliding ringgit, while thousands are expected to turn up in a rally this coming weekend to protest against his role in the 1MDB scandal.

The Malaysian ringgit stabilized this morning after Bill Dudley, the New York Fed president, said overnight that a September rate hike was looking less likely. The ringgit has fallen from 3.60 in May to 4.23 recently.

Najib seems to be taking a page out of former premier Mahathir Mohamad‘s playbook. He appointed former Second Finance Minister Nor Mohamed Yakcop, who helped Mahathir design Malaysia’s now-abandoned capital controls and currency peg.

Meanwhile, large “Bersih 4.0″ rallies in Kuala Lumpur, Kinabalu and Kuching will likely hit global headlines this weekend.

But foreign analysts do not seem to believe Najib will go. One reason is that the opposition does not have a viable leader – the rebel icon Anwar Ibrahim is now in prison for sodomy. ” In the past three Bersih rallies, the public was drawn by the charisma of Anwar, a former UMNO leader who has been physically and politically abused after a fallout with party strongman Mahathir Mohammad in the 1990s,” wrote Eurasia Group‘s Achmad Sukarsono.

In the coming days, Najib will likely play the race card. The rally will be led by the urban middle class and dominated by the more prosperous Chinese and Indian ethnic minority. In an August 23 speech, Najib already said Malays and Muslims would be deprived if his UMNO party loses power.

“We continue to believe that Najib will survive the crisis he faces at 1MDB and his focus will be to consolidate power in the party and in government,” wrote Eurasia.

Now the wild card is former premier Mahathir Mohamad. He said in an interview with the Financial Times that Najib “has to go“. Will he be the king slayer again this time?

But even if Najib resigned, he would likely be replaced by another UMNO insider, which does not change the overall economic fundamentals in Malaysia, according to London-based Capital Economics. See my yesterday’s blog “Ringgit At 17-Year Low: 1MDB Scandal Holds Malaysia Back“.

The Malaysia KL Composite Index rose 0.75% this morning, hardly any gain considering the entire Asia was rallying. Indonesia’s Jakarta Composite Index jumped 2.6%, while the Philippines SEI Index rose 1.8%. The iShares MSCI Malaysia ETF (EWM) rose 3.7% overnight.