Malaysia Stocks Fall to 1-Year Low on Political Woes, Inflation

By Chan Tien Hin

July 2 (Bloomberg) -- Malaysia's key stock index slumped to its lowest in more than a year on concern political turmoil and accelerating inflation will curb economic growth.

Guocoland Malaysia Bhd. tumbled the most in four months, leading property stocks lower. Bumiputra-Commerce Holdings Bhd. led declines by banks, sliding to its lowest in almost two years.

About 10,000 people rallied in a Kuala Lumpur suburb last night to support Malaysian opposition leader Anwar Ibrahim, who is facing a new sodomy allegation. He has denied the claims and has accused the government of a conspiracy.

``It's a very lethal cocktail: You've got inflation, you've got politics, you've got global markets seizing up again,'' said Patrick Chang, who helps manage the equivalent of $4.5 billion as vice president of equities at CIMB-Principal Asset Management Bhd. in Kuala Lumpur. ``It's doesn't look good.''

The Kuala Lumpur Composite Index fell for a fifth day, dropping 19.87, or 1.7 percent, to 1,157.96 at the 12:30 a.m. local time break, set for its lowest since March 7, 2007. Only four stocks rose on the 100-member benchmark index. The July stock index futures slid 0.7 percent to 1,144.50. The MSCI World Index fell 8.1 percent in June.

Guocoland dropped 12 sen, or 8.9 percent, to 1.23 ringgit, the biggest decliner on the Composite Index. Sunrise Bhd., Malaysia's biggest developer of high-end condominiums, sank 14 sen, or 9 percent, to 1.42 ringgit, its fifth day of declines.

Bumiputra-Commerce, Malaysia's second-biggest bank, dropped 15 sen, or 2 percent, to 7.45 ringgit, headed for its lowest close since November 2006.

`Complete Fabrication'

Anwar said on June 29 a police report by a former aide accusing him of sodomy is a ``complete fabrication'' designed to halt his challenge to the government in the same way a 1998 charge led to his imprisonment.

The former Deputy Prime Minister sought refuge at the Turkish Ambassador to Malaysia's residence earlier this week because he feared for his life after police said they were investigating him for sodomy.

The sodomy charge follows the ruling coalition's worst-ever election result in March that raised doubt over Prime Minister Abdullah Ahmad Badawi and his public spending program. On March 10, a day after the polls result, the Composite Index plunged 9.5 percent, the steepest drop in a decade.

Last month, the government raised gasoline prices by 41 percent and electricity prices were increased at the beginning of this month. The central bank in June raised its 2008 average inflation forecast to 4.2 percent from a March estimate of as much as 3 percent.

To contact the reporter on this story: Chan Tien Hin in Kuala Lumpur thchan@bloomberg.net