By Rashmi Ashok
Oct 28 (Reuters) - Malaysian shares eased on Wednesday as political tensions cast doubt over whether the government will be able muster enough votes to pass the 2021 budget next week, while broader Asian shares also fell as global coronavirus cases raged on.
Sentiment remained subdued as infections spiked in the United States, Russia, France and other countries recently, forcing many European nations to issue new restrictions, while the looming U.S. presidential election added to uncertainty.
Malaysia's benchmark stock index .KLSE was among top losers in the region, continuing recent declines after Prime Minister Muhyiddin Yassin's failed bid to declare a state of emergency sparked calls for his resignation.
"All eyes are on the 2021 Federal Budget next week, which comes as a key test of confidence in Prime Minister Muhyiddin Yassin's coalition government," analysts at ING wrote.
"We see politics continuing to exert weakening pressure on the ringgit. We are reviewing our end-year 4.18 USD/MYR forecast for a possible upward revision."
While a key ally affirmed its support for him, his position still remains precarious, with a wafer-thin majority in parliament and no guarantee that all ruling coalition lawmakers will vote in favour of the budget.
Pressure on the ringgit MYR= was offset by data which showed Malaysia's trade surplus surged in September, fuelled by a recovery in exports and a fall in imports, which ING analysts say is likely to remain the key life support for the currency amidst the ongoing political uncertainty.
Thailand's baht THB=TH rose 0.3% and its benchmark stock index .SETI added 0.5% after data showed the country's factory output dropped a smaller-than-expected 2.75% in September.
The Philippine peso PHP= traded a shade firmer after the central bank governor Benjamin Diokno on Tuesday said there was no need to ease monetary policy further given the slew of indicators that point towards economic recovery.
"Diokno may be holding steady as he refrains from pushing real policy rates deeper into the red (currently at -0.5%) while also recognizing that monetary policy has done its job as he looks to fiscal stimulus to complement his recent measures," said ING's senior economist for Philippines, Nicholas Mapa.
Mapa added that the peso would likely be supported for the remainder of the year given increased foreign buying amid a drop in coronavirus infections and lower corporate demand for the dollar due to healthy dollar inflows from remittances and portfolio flows.
Indonesian markets were closed on account of a local holiday and trade will resume on Nov. 2.
** Top losers on FTSE Bursa Malaysia Kl Index .KLSE include Hartalega Holdings Bhd HTHB.KL down 1.75% and IHH Healthcare Bhd IHHH.KL down 1.36%
** Top gainers on the Thailand's SETI .SETI include Thai Energy Storage Technology 3K-BAT.BK up 29.36% and Thai Film Industries TFI.BK up 20%
** Malaysia's 10-year benchmark yield was up 0.5 basis points at 2.655% and 3-year benchmark yield rose 0.5 basis points to 1.783%
Asia stock indexes and currencies at 0421 GMT
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(Reporting by Rashmi Ashok in Bengaluru; Editing by Kim Coghill)
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