KUALA LUMPUR, MALAYSIA - MALAYSIA'S ruling coalition has suffered a major swing against it in general elections that could seriously dent its majority in parliament, political observers said on Saturday.

Citing unofficial and preliminary results, they said the Barisan Nasional coalition was at risk of losing the island state of Penang for the first time and had failed to claw back Kelantan, the only state it does not rule.

'Basically, what we are seeing right now is that there is a massive swing against the Barisan Nasional among the ethnic Indian and Chinese electorates,' said Merdeka Centre research firm pollster Ibrahim Suffian.

'And also a significant swing of about 15 per cent, I estimate, from among the Malay electorate as compared to the 2004 elections,' he said, referring to the Muslim Malays, who dominate the nation's population.

'Judging by the extent to which the unofficial reports are coming through there is a slim chance that the BN's two-thirds majority (in parliament) might be breached.'

However, Mr Ibrahim noted that electoral authorities were slow to release official data and that 'right now it's anecdotal information.'

Earlier, sources on both sides of politics said Malaysia's opposition staged a stunning upset and won northern Penang state.

'It's bad. They have lost Penang,' a source to Prime Minister Abdullah Ahmad Badawai told Reuters only two and a half hours after polling booths closed at 0900 GMT.

Earlier reports also said Malaysia's national ruling coalition failed on Saturday in its bid to win back control of the northeastern state of Kelantan from the country's main opposition Islamist party.

Kelantan is Malaysia's only opposition-held state.

The opposition, rallied by former deputy premier Anwar Ibrahim, has formed a loose alliance aimed at depriving the coalition of its two-thirds majority that allows it to change the constitution at will.

Three opposition parties held just 20 seats in the outgoing 219-seat parliament, leaving the coalition with a thumping majority.

Barisan Nasional's chairman in Kelantan, Annuar Musa, painted a gloomy picture for the coalition.

'It looks very bad for BN, not just in Kelantan but across the country,' he said. 'Just watch the results as they come out. I cannot say more.'

Ms Tricia Yeoh, director of the Centre for Public Policy Studies think tank, said that the elections could transform Malaysian politics.

'The winds are very strong across the entire nation,' she said. 'It is not just a message to the government but a slap in the face.'

Ms Yeoh said she expected the coalition to narrowly achieve a two-thirds majority.

'The opposition is likely to gain up to one third of parliament, at this point. But it is a very close fight and results are still coming in.'

Barisan Nasional has ruled for about half a century, led by the United Malays National Organisation in league with race-based parties that represent the nation's ethnic Chinese and Indian voters.

Prime Minister Abdullah Ahmad Badawi won a landslide victory in 2004 polls, but his support has plummeted amid public anger over high inflation, rising crime rates and ethnic tensions.

Malaysia's minorities are concerned over the 'Islamisation' of the country and policies that favour Malays, and Indian activists held rare protests last year claiming decades of discrimination.

In early results, Barisan Nasional has secured 23 parliamentary seats in the new 222-seat parliament, including eight that were won uncontested, according to the Election Commission's website.

The coalition held all those 23 seats in the outgoing parliament.

In the first seat to change hands, the opposition Democratic Action Party won a parliamentary seat in the Sarawak state capital of Kuching on Borneo island. -- AFP, REUTERS