SE Asian Stocks-Politics, inflation weigh on Malaysia

By Yvonne Cheong

SINGAPORE, July 2 (Reuters) - Malaysian equities led losses
in Southeast Asian stock markets as the country faced an
uncertain political future on top of inflation pressures that
battered stocks such as telecoms firm TM International
TMIT.KL.

Global equities are being smothered by investors' fears
over how stagflation, a combination of quickening inflation and
slowing growth, could hurt consumer demand and corporate
earnings. [nSP131963]

A Reuters poll also showed Malaysia's economic growth would
probably slow to a three-year low even as the ruling government
clings tenaciously to power and faces accusations by key
opposition leader Anwar Ibrahim of political conspiracy.
[nSP128043]

"I think generally investors have put a higher premium on
the Malaysian market due to the current political uncertainty,"
said Michael Lai, fund manager at Fortress Capital Asset
Management.

On Tuesday, the Dow Jones Industrial Average dipped below
11,200 points in intra-day trading, spooking Asian markets as
investors feared the index might break the level, he noted.

Malaysia's benchmark index fell 1.8 percent, the
Philippine index .PSI eased 0.9 percent, while Thailand
.JKSE shed 1.1 percent on banks and property.

Top lender Bangkok Bank BBL.BK fell 3.4 percent,
third-ranked Siam Commercial Bank SCB.BK gave up 3.2 percent,
while the country's biggest developer, Land & Houses LH.BK,
fell 5.8 percent.

Indonesia .JKSE closed flat, while Singapore .FTSTI
inched up just 0.08 percent but Vietnam .VNI bucked the trend
to rise 2.4 percent, marking an eighth straight day of gains.

"Some believe that financial statements for the second
quarter, soon to be released by listed companies, would not be
so gloomy as previously predicted," said Tong Minh Tuan, an
economist at Bao Viet Securities Company.

The emerging economy's growth slowed in the first half of
this year, raising hopes that soaring inflation and rapid
credit growth will ease. [nHAN171181]

In Singapore, a profit warning from rival airline Cathay
Pacific (0293.HK: Quote, Profile, Research) sent Singapore Airlines' (SIAL.SI: Quote, Profile, Research) share
price down 2 percent, as investors feared soaring fuel prices
would have the same effect on the world's most valuable
airline. [nSIN319051]

But analysts noted that for Cathay, fuel surcharges were
subject to approval by authorities.

"SIA is not subject to any such restrictions by Singapore
authorities for flights out of Singapore, essentially having a
free hand in raising fuel surcharges," analyst K Ajith of UOB
Kay Hian said in a research note.

Oil prices CLc1 clung to near-record levels of above $141
as tensions between Israel and Iran brewed fears that supplies
from OPEC's second-biggest oil producer might be disrupted.
(Additional reporting Soo Ai Peng and Pham Hong Hanh; Editing
by Clarence Fernandez)