KUALA LUMPUR - MALAYSIA quickly offered investors reassurance Tuesday that the economy was strong despite turbulence in US and regional financial markets after the bourse dived 2.4 per cent in early trade.

'The fundamentals of the Malaysian economy are strong. The economy has the capacity to weather the destabilising consequences ... in the US economy and international financial markets,' Mr Najib Razak, finance minister said.

The local bourse has fallen 29 per cent this year.

Major Asian regional markets dived sharply after the Dow Jones index overnight plummeted by 777.68 points or 6.98 per cent after the US House of Representatives rejected a 700-billion-dollar (S$996 billion)rescue for the financial system.

Mr Najib said Malaysia was a diversified economy and its 'stronger links to Asia' would allow the country to be in a better position to 'weather this challenging period'.

But the US is among Malaysia's top export destinations and the weakening US economy was expected to dampen demand for local electrical and electronic products.

Mr Najib brushed aside analysts concerns that political uncertainty in the country would also keep investors sidelined.

'What is so uncertain about our political situation? The (ruling) National Front continues to be in power,' he said.

The opposition gained control of a third of parliamentary seats in March elections, and opposition leader Anwar Ibrahim has promised to topple the government within weeks, rattling investors and Malaysia's stock market.

But Mr Najib issued a veiled warning to the opposition not to destabilise the economy.

'Now is not the time for politicking, speculation and political games by anybody. The government will act responsibly and swiftly to address any eventuality to safeguard the interests of the people and the nation,' he said.