Embattled Malaysian PM wins ruling party's support

By Jalil Hamid and Ramthan Hussain

KUALA LUMPUR (Reuters) - Malaysia's prime minister won the backing of the country's main ruling party on Thursday, fending off a challenge to his leadership from the former premier that threatens to deepen political turmoil.

Malaysia's ruling United Malays National Organisation (UMNO) endorsed Abdullah Ahmad Badawi as party leader and accepted the resignation of ex-premier Mahathir Mohamad, who has called for the prime minister to step down.

"The supreme council has decided to continue to support the leadership of the prime minister," Deputy Prime Minister Najib Razak told reporters after a three-hour emergency meeting of the party's top decision-making body. One council member said the meeting was attended by 29 of the 30 members.

Mahathir's departure has cast doubt on Abdullah's future and raised political uncertainty as the government is grappling with high inflation, slowing economic growth and rising subsidies.

Abdullah also faces pressure from opposition leader Anwar Ibrahim who said his group had the numbers to topple the government.

"The excessive politicking has generated extra uncertainties into the whole political and economic environment," said Zainal Aznam Yusof, a senior fellow at Malaysia's Institute of Strategic and International Studies.

UMNO has been in turmoil since a poor showing in March elections when the Barisan Nasional (BN) coalition which it dominates lost its two-thirds majority in parliament.

The stock market eased on Wednesday after losing more than 1 percent the previous day on jitters over the political flux.