When Abdullah Badawi took over the helm as Malaysia's prime minister just over a week ago, foreign investors finally started to eye the Malaysian market again.
"With Mahathir at the helm, there were fundamental reasons for foreign investors not to come into Malaysia," says Tan Teng Boo, head of ICapital.biz, a Malaysian investment advisory firm.
"Badawi sees corruption as a serious issue and has said that a confrontational style is not the best way for handling foreign policy issues," he said.
"Malaysia is a very attractive place for foreign funds, but why would fund managers want to come into a market if they don't feel welcome?"
During his 22 years of autocratic rule, Dr Mahathir transformed the country into one of the most prosperous countries in south-east Asia and the Muslim world. However, his rule was tainted by allegations of corruption and the tendency for state companies to be sold to supporters of the ruling party, the United Malays National Organisation (Umno).
Equity investors are concerned that the rent-based system of political patronage has not been dismantled effectively and will continue to obstruct economic efficiency.
Dr Mahathir's anti-western rhetoric, coupled with capital controls put in place at the height of the Asian crisis, have also deterred many foreign investors from entering the market.
Although the Malaysian equity market has performed well in the past few weeks, with the benchmark index hitting its highest level in three years, a lot of the growth is due to domestic liquidity rather than foreign portfolio inflows.
But the change in leadership and the expectation that Mr Abdullah will bring about significant policy changes could reverse the trend, say analysts.
"Foreign fund inflows could return now that Abdullah takes over the same finance minister portfolio as Mahathir. The view is that the new prime minister would usher in changes, which the market will view very positively," says Paul Schymyck, regional economist at IDEA global consultancy in Singapore.
One of the key areas that investors would be looking at is improvement in corporate governance. Unlike Mahathir, Mr Abdullah has so far been free of accusation of cronyism. He has said corruption is "a terrible disease that can hurt our image and competitiveness".
"Obviously, investors don't expect the system to be overhauled overnight, what they're seeking is to see meaningful improvements in issues such as transparency and greater meritocracy. Abdullah is regarded as "Mr Clean", therefore there's a lot of cautious optimism going forward," added Schymyck.
Under Dr Mahathir, Malaysia attracted foreign investors by building motorways and ports and creating the Multimedia SuperCorridor, its own "Silicon Valley". But the rise of China and India has diverted money away from Malaysia.
Inward foreign direct investment fell from 4.9 per cent of Malaysia's gross domestic product in 1999 to around 1.5 per cent this year, according to the Economist Intelligence Unit.
Analysts say Mr Abdullah must offer more incentives to foreign investors by further opening the economy and financial sector. There is also a need to rein in fiscal spending to pare down the country's fiscal deficit.
Looking forward, investors are focusing their attention on the upcoming general elections to see if there will be a smooth transition in power. It's important that Mr Abdullah gets the electoral support he needs to push ahead with some of the more controversial policy changes.
One of the more prickly issues is whether Malaysia does away with its fixed exchange rate, introduced six years ago to rein in currency speculation during the Asian crisis.
Schymyck claimed, "it's the peg that's keeping investors at bay.
If the elections are over in the next six months, we could expect something in the horizon."