The Kuala Lumpur Composite Index fell for a fifth day, dropping 21.13 points, or 1.8per cent, to close at 1,153.7, its lowest since March6 last year. Only 10 stocks rose on the 100-member benchmark index. It was the second-worst-performing benchmark in Asia.
About 10,000 people rallied in a Kuala Lumpur suburb on Tuesday night to support Mr Anwar, who has denied the claims and 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 Mr Patrick Chang, vice-president of equities at CIMB-Principal Asset Management in Kuala Lumpur.
The sodomy charge follows the ruling coalition's worst-ever election showing in March. On March 10, a day after the polls results, the Composite Index fell 9.5per cent, its steepest drop in a decade. It is now down 11per cent since the elections.
Datuk Seri Abdullah, who heads Umno, the biggest party in the ruling Barisan Nasional coalition, has defied demands to quit and is struggling to preserve a coalition which has been in power since Malaysian independence in 1957.
'For Malaysia, we do not expect much political clarity and overall policy direction until Umno's house is in order, and we continue to see justification in assigning it a higher risk premium,' Goldman Sachs said in a report yesterday.
But some economists say the downturn is mainly a reaction to the global economic situation.
'It's a combination of many factors, with the Anwar issue being one of them,' Mr Azrul Azwar, senior economist at Bank Islam, told The Straits Times.
'If it is due to the Anwar saga and political instability, it shouldn't last long, but if it is due to a potential slowdown in the world and threats of rising inflation, the impact will last longer.'
BLOOMBERG