KUALA LUMPUR (Reuters) - Malaysia's share market is expected to slide on Monday, gripped by political uncertainty after voters stunned the government with a massive protest vote.

Brokers and fund managers said Malaysian politics was in uncharted waters after Prime Minister Abdullah Ahmad Badawi's coalition registered its worst-ever result, losing a third of its federal seats and five states to the opposition in weekend polls.

"There would be some major initial reaction in the markets," said Pankaj Kumar, chief investment officer at Kurnia Insurance, who helps manage 1.6 billion ringgit ($506 million) in assets.

A sales broker said he expected Malaysia's benchmark stock index, the Kuala Lumpur Composite Index (KLCI) to fall around 50 to 100 points, or up to around 8 percent, on Monday as investors tried to answer that question.

The KLCI index closed down 0.26 percent at 1,296.33 on Friday, in line with regional markets, and has fallen 9 percent since Abdullah called on February 13 for early elections.

Brewing stocks such as Carlsberg Brewery Malaysia Bhd and Guinness Anchor Bhd are likely to be in focus on Monday, given the success of Islamist party PAS, which took control of three state assemblies in Saturday's elections.

Gaming and leisure stocks such as Magnum Corp and Berjaya Sports Toto could also come under pressure.

PAS's policy bans alcohol and gambling and calls for amputations and stonings of non-Muslim thieves and adulterers, but it has recently tried to soften its stance and broaden its appeal to non-Muslims, who make up more than 40 percent of the population.

Given the scale of its electoral success, winning seats in multi-racial urban areas as well as the Muslim countryside, PAS looks to have attracted many non-Muslim votes on Saturday.

LONG TERM, "NO CONCERNS"

"The market is not going to be so good. There will be major reaction on Monday," said an international-sales broker based in Malaysia. "It would take time for the market to settle down."

Former premier Mahathir Mohamad also warned that investors could now feel unsafe and urged Abdullah to step down as leader.

"I am afraid investors are already showing that this election worries them," Mahathir said. "Now, unless they are blind, I think they will feel very unsafe in the country."

Despite the concerns, several fund managers and brokers said the so-far peaceful acceptance of the poll result was encouraging and perhaps pointed to a new political maturity in this country, which has effectively never known a change of government.

Some said PAS was not necessarily such a big worry, given that it would have to be pragmatic in a multi-racial nation.

"We have no concerns in regards to the election," said Malaysia-based fund manager Gerald Ambrose, of Aberdeen Asset Management, which has $2.2 billion invested in Malaysian stocks.

"We have a long-term investment plan. The different results in the polls would not make any difference in our portfolio."

But Tim Condon, Singapore-based head of Asia Research at investment bank ING, questioned whether the government could still proceed with its spending plans, especially its agenda to harness $325 billion in mostly private capital to create five new economic development zones around the country.

PAS now controls three of the northern and eastern states covered by these plans, raising concerns whether PAS will cooperate with the national government in implementing them.

"The key to the future of the northern and, to some extent, the eastern (zones) is how well the federal government and the state governments can work hand in hand," a source close to the prime minister admitted on Sunday.

Over time, some market commentators said, the new political landscape could improve the investment climate, by quickening reforms, though a lot depended now on how the opposition behaved.

Already, the opposition Democratic Action Party, which won the industrial heartland state of Penang, says it will use its new clout to push for a reform that foreign investors have long demanded: the awarding of government contracts by open tender.

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