Malaysian shares to suffer as political fears mount

KUALA LUMPUR, June 23 (Reuters) - Malaysian stocks will
probably fall further on Monday, with investors ready to take
profits as Prime Minister Abdullah Ahmad Badawi struggles to
fend off criticism from within his ruling coalition.

The Sabah Progressive Party (SAPP), a small party within
the ruling Barisan Nasional coalition, has said it will table a
no-confidence vote against the premier on Monday.

"The goings-on in parliament today could very well haunt
investor sentiment and there will be a downside bias," said a
dealer with a local broker.

The east Malaysian party has only two members of parliament
but there are concerns its move could embolden others in the
14-party coalition to break ranks and deal another blow to an
increasingly weakened administration.

On Friday, Malaysia's benchmark index .KLSE gained 0.9
percent to 1,206.67, regaining a little ground from the
previous day's level, which was the lowest since March, when
the ruling coalition suffered its worst election setback in 50
years.

Dealers say Bumiputra-Commerce, Malaysia's second-largest
lender, could stand out after it purchased a 42 percent stake
in Thailand's BankThai BT.BK, although it would probably be
unable to lift the whole market.

"Bumi-Commerce's drive to become a regional champion is one
spark, but it is just one spark in a market that is only moving
to consolidate lower on political uncertainity, rising
inflation and weakening global economies," said another dealer.

However, bargain-hunting may surface, with investors
looking to gain exposure to plantation stocks such as Sime
Darby (SIME.KL) and IOI Corporation (IOIB.KL).

"Red-hot crude oil prices have a positive bearing on most
commodities and firms with a strong exposure to palm oil are
still doing quite well. Such stocks can be a good hedge against
inflation," said a trader with an investment bank.

Malaysia's inflation rate hit a 22-month high of 3.8
percent in May and is set to rise further following a hike in
domestic fuel prices.

Here are news stories and factors that may affect the
Malaysian stock market on Monday.
---------------MARKET SNAPSHOT @ 00:13 GMT
------------------
-------------------------------------------------------------

INSTRUMENT LAST PCT CHG NET CHG S&P 500

.SPX 1,317.93 -1.85% -24.900 USD/JPY

JPY= 107.31 0.08% 0.090 10-YR US TSY YLD
US10YT=RR 4.152 -- -0.016 SPOT GOLD
XAU= $905.60 0.53% 4.750 US CRUDE CLc1
$135.04 -0.24% -0.320 DOW JONES .DJI
11842.69 -1.83% -220.40 ASIA ADRS .BKAS
152.41 -3.64% -5.75
--------------------------------------------------------------
> US STOCKS-Dow closes below 12,000 on bank jitters, oil
[.N] > Oil jumps on rising Iran-Israel tensions, Nigeria
[O/R] > FOREX-Dollar falls on credit jitters, Fed rate worries
[USD/] > TREASURIES-Bonds up as stocks drop on banks weaknesses
[US/] > Gold ends tad lower, focuses on Saudi oil meeting
[GOL/] > SE Asian Stocks-Thai posts biggest daily gain in 5
mths [.SO] > Malaysia raises fuel price for foreign motorists
[ID:nKLR39424] > Malaysia's CIMB to buy BankThai stake for
$177m [ID:nSP318613] > Malaysia's c.bank reserves at $124.6 bln

[ID:nKLA007691] > Malaysian pension fund may lead MBSB
buyout [ID:nKLR164772] > C.bank chief explains Khazanah
resignation [ID:nL21282618] > Malaysia's June 1-20 palm
exports down 11.2 pct [ID:nKLR179023] > No delay in new
projects-Malaysia's Sime Darby [ID:nSP90201] > Malaysia's
April manufacturing sales up 18.5 pct[ID:nKLA007688]
(Reporting by Niluksi Koswanage; Editing by Alan Raybould)