KUALA LUMPUR (BLOOMBERG) - Malaysian stocks rallied after Fitch Ratings raised its outlook for the nation after signaling a rating downgrade earlier in the year.

The FTSE Bursa Malaysia KLCI Index climbed 1.7 per cent, poised for the biggest increase since May 2013. IHH Healthcare Bhd, MISC Bhd and SapuraKencana Petroleum Bhd were the biggest gainers, jumping more than 3 per cent.

The benchmark stock gauge sank to its lowest level in six months on Monday as foreign investors pulled funds amid the threat of a cut by Fitch and concerns over rising debt at state investment company 1Malaysia Development Bhd.

The ratings affirmation gives Prime Minister Najib Razak more time to improve the country's public finances. Andrew Colquhoun, Fitch's head of Asia Pacific sovereign ratings, warned in March that there was more than a 50 per cent chance of a downgrade.