[HONG KONG] Malaysia's controversial state-owned investment fund 1MDB came under pressure in the bond market this week after the nation's landmark election raised questions about its future.

The vote ousted Najib Razak, who faced public anger over a money laundering scandal involving hundreds of millions of dollars siphoned from 1MDB. He has consistently denied wrongdoing. New Prime Minister Mahathir Mohamad said he thought he could recover most funds from 1MDB and that Mr Najib will pay the consequences if the law finds any wrongdoing.

The fund's dollar bonds due 2023 were indicated at about 80 cents on the dollar on Friday, traders said. That came after a 11.7 cent slide on Thursday, following the election, the sharpest decline in data compiled by Bloomberg going back to 2016.

1MDB announced plans to break up assets and wind down operations in 2015, but Dr Mahathir's win is fueling speculation that its closure could be more certain.

If Mr Najib had stayed in place, 1MDB's survival could have been dragged out, said Ismael Pili, Singapore-based co-head Asian bank research at CreditSights.

More details from Malaysian investigations into 1MDB could come to light with Dr Mahathir at the helm, since roadblocks will likely now be less prominent, Mr Pili said.

On the campaign trail, Dr Mahathir lambasted Mr Najib as a "thief" and in the aftermath of his election win, he said he is not seeking revenge but the rule of law will be fully implemented.

1MDB CEO Arul Kanda said he couldn't immediately comment after the election. The fund has consistently denied wrongdoing.

Malaysia's government provided a letter of support for 1MDB's 2023 bonds, but hasn't guaranteed the debt, adding to uncertainty amid the leadership change.

The fate of credits such as 1MDB will become clearer in ensuing weeks or months, Citic CLSA Securities said in a note on Friday.

BLOOMBERG