By Rashmi Ashok
Oct 28 (Reuters) - Malaysian shares eased on Wednesday as political tensions cast doubt over whether the government could pass the 2021 budget next week, while a surge in September exports and ballooning trade surplus helped prop up the ringgit.
Broader Asian equities were subdued as COVID-19 cases spiked in the United States, Russia, France and other countries, prompting curbs from many European nations, with the looming U.S. presidential election adding to worries.
The Malaysian stock index .KLSE fell 0.4%, continuing recent declines, as uncertainty 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 support for the premier, 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.
The ringgit MYR=, however, reversed early losses to stand 0.2% higher after data showed Malaysia's exports jumped 13.6% in September, rising at their fastest pace in nearly two years amid a surge in demand for manufactured and agricultural goods.
ING analysts say the wider trade surplus, fuelled by subdued imports, is likely to remain the key life support for the currency amidst the ongoing political uncertainty.
Thailand's baht THB=TH rose 0.3% to its highest in more than two weeks and the stock index .SETI added 0.5% after data showed the country's factory output dropped a smaller-than-expected 2.75% in September.
Thailand is set to release trade data for September on Oct. 30. Investors will closely watch for signs of a recovery in its exports from the 8.2% drop recorded in August.
The Chinese yuan CNY=CFXS eased against the dollar after some banks tweaked a methodology for fixing the yuan's daily midpoint, in what some believe is a sign that Beijing may be attempting to slow the pace of the rally in the currency.
Despite the yuan's weakness casting a shadow, most Asian currencies clocked slim gains as the dollar =USD slipped in the face of rising uncertainty around the Nov. 3 election.
** Top gainers on the Thailand's SETI .SETI included Thai Energy Storage Technology 3K-BAT.BK, up 29.36%, and Erawan Hotel Growth Property Fund ERWPFu.BK, up 12.44%.
** Top losers on FTSE Bursa Malaysia Kl Index .KLSE included Top Glove Corporation Bhd TPGC.KL, down 1.68%, and Hartalega Holdings Bhd HTHB.KL, down 1.42%.
** Singapore's 10-year benchmark yield was down 0.6 basis point at 0.843%, while the 5-year benchmark yield fell 1.2 basis points to 0.464%.
Asia stock indexes and currencies at 0649 GMT
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(Reporting by Rashmi Ashok in Bengaluru; editing by Uttaresh.V)
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