Malaysia's Anwar to be held in custody: lawyers

KUALA LUMPUR (Reuters) - Malaysian opposition figure Anwar Ibrahim will be remanded in police custody for a sodomy case, his lawyers said on Wednesday, setting the stage for a political showdown that could alarm foreign investors.

"The excuse is they need to take further statements," Sankara Nair, one of Anwar's lawyers, told reporters. "They are detaining him further."

Nair said it was unknown how long Anwar would be held.

In a replay of events a decade ago when he was jailed for sodomy and corruption, Anwar was arrested by police earlier on Wednesday on a sodomy complaint brought by a former aide.

Sodomy, even between consenting adults, is a crime punishable by up to 20 years in prison in mainly Muslim Malaysia.

Anwar's supporters have painted the arrest as a political conspiracy designed to hinder the opposition's rise, and indicated the move could set off street protests.

The ruling Barisan Nasional coalition is still trying to recover from a disastrous showing in a March general election, when it lost its two thirds parliamentary majority and ceded five states to the opposition.

The government has denied the sodomy allegation was a political conspiracy.

"The purpose of the investigations is not to fix someone but is to really help him clear his name," Domestic Trade Minister Shahrir Samad said.

A senior police official, who declined to be identified, confirmed that Anwar would be held in custody.

The authorities sealed off roads to the police headquarters where Anwar had been taken, while a water cannon was on standby, as the authorities braced for a possible repeat of 1998 protests when Anwar's arrest brought tens of thousands onto the streets.

About 400 Anwar supporters had stood outside the police headquarters carrying banners demanding his release.

"Don't provoke the people ... why are police trying to test the people's patience?" Azmin Ali, a leader of Anwar's People Justice Party, said. "I am giving a very strong reminder to the police, don't provoke us."

Anwar was expected to be charged with sodomy, William Leong, another of Anwar's lawyers, said earlier on Wednesday.

Leong said the authorities had acted extraordinarily by arresting Anwar instead of allowing him to voluntarily assist police with their investigations.

"If it had been an ordinary investigation, then they should have allowed him to go to the police headquarters as has been agreed and they should have allowed him to take his statement," he said.

Anwar had agreed to meet investigators on Wednesday but was arrested before he went to the police.

MARKET TREMORS

The arrest is likely to spark more tremors in financial markets, which have groaned under the weight of a protracted political drama involving the government and opposition.

"Investors will probably shy away for a while until these things settle," said Wee Kim Hong, head of research at M&A Securities. "I don't think anybody will want to commit to a long position for now."

Malaysia's ringgit fell to 3.2250 to the dollar from 3.2160 on Tuesday. Shares ended down 0.7 percent.

Anwar was sacked as deputy prime minister in 1998 and later jailed for corruption and sodomy after leading street protests against then prime minister Mahathir Mohamad's government during the Asian financial crisis.

The supreme court overturned the sodomy conviction six years later.

Other opposition leaders rallied behind Anwar.

"We will still work together very well," said Nasharudin Mat Isa, a leader of Parti Islam se-Malaysia (PAS). "This is going to even strengthen the coalition. This issue is going to create a new kind of movement among the public."

U.S. Ambassador to Malaysia James Keith said the arrest "raises serious questions and concerns", adding: "We urge Malaysian authorities to resolve this matter in a manner that enhances confidence in the rule of law in Malaysia."

Anwar had appealed earlier on Wednesday for his supporters to remain calm if he was arrested.

"I appeal to them to exercise patience and let us deal with this according to standard procedures," he said.

(Additional reporting by Soo Ai Peng and Faisal Aziz; Writing by Liau Y-Sing; Editing by Alex Richardson)