Malaysia's governing coalition extended its half-century rule despite its worst-ever performance in a general election, potentially undermining Prime Minister Najib Razak and exposing growing racial polarization in the Southeast Asian nation.
Najib, 59, could come under pressure from conservatives in his ruling party for not delivering a stronger majority in Sunday's election despite a robust economy and a $2.6 billion deluge of social handouts to poor families.
The National Front won 133 seats in the 222-member parliament, down from 140 in 2008 and well short of the two-thirds majority that Najib had aimed to capture. The opposition won 89 seats, up from 82 last time.
Kuala Lumpur's stock market could gain on Monday on investor relief that the untested opposition failed to take power, but any optimism could be tempered by the prospect of political uncertainty due to the weak win. The Malaysian ringgit surged to a 10-month high early on Monday.
While support for the ruling coalition from majority ethnic Malays remained solid, ethnic Chinese who make up a quarter of Malaysians continued to desert the National Front, accelerating a trend seen in the previous election.
Ethnic Chinese have turned to the opposition, attracted by its pledge to tackle corruption and end race-based policies favoring ethnic Malays in business, education and housing.
"We will work towards more moderate and accommodative policies for the country," a grim-faced Najib told a news conference after the majority was confirmed. "We have tried our best but other factors have happened ... We didn't get much support from the Chinese for our development plans."
Former Prime Minister Mahathir Mohamad, still a powerful figure in the dominant United Malays National Organisation (UMNO), told Reuters in an interview last year that Najib must improve on the 140 seats won in 2008. Najib could face a leadership challenge from within UMNO later this year as a result of falling short.
Anwar Cries Foul
The National Front also failed to win back the crucial industrial state of Selangor near the capital Kuala Lumpur, which Najib had vowed to achieve.
The three-party opposition alliance led by former deputy prime minister Anwar Ibrahim had been optimistic of a historic victory, buoyed by huge crowds at recent rallies.
But as counting went late into Sunday night, it became clear that the fractious opposition would be unable to unseat one of the world's longest-serving governments and pull off what would have been the biggest election upset in Malaysia's history.
After claiming an improbable early victory, Anwar later said he rejected the result because the Election Commission (EC) had failed to investigate evidence of widespread voter fraud.
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"It is an election we consider fraudulent and the EC has failed," he said.
The National Front has significant advantages, including its deep pockets, control of mainstream media, and an electoral system skewed in its favor.
"The new government does have a credibility deficit at the very moment due to the very tenacious and contentious election process," said Oh Ei Sun, a senior fellow at the S. Rajaratnam School of International Studies in Singapore.
"I think they have to redouble their efforts in rebuilding their trust among the people."
Anwar had accused the coalition of flying up to 40,000 "dubious" voters, including foreigners, across the country to vote in close races. The government says it was merely helping voters get to home towns to vote.
The opposition also lost control of the northern state of Kedah, one of four it had taken over in the 2008 success.
The 2008 result signaled a breakdown in traditional politics as minority ethnic Chinese and ethnic Indians, as well as many majority Malays, rejected the National Front's brand of race-based patronage that has ensured stability but led to corruption and widening inequality.
Ethnic Chinese parties affiliated with the National Front suffered heavy losses in 2008 and were punished by voters again on Sunday. The National Front's ethnic Chinese MCA party won just five seats, down from 15 in 2008, according to the latest count.
That leaves the National Front dominated more than ever by ethnic Malays, who make up about 60 percent of the population, increasing a trend of racial polarization in the country.
"There needs to be an effort to look back at racial harmony," said Khairy Jamaluddin, the head of UMNO's youth wing and a member of parliament. "We don't want the results to be looked at through a racial lens."