KUALA LUMPUR: Malaysian stocks fell for a fifth day as a sell-off in the nation's biggest companies dragged the benchmark index to its lowest level in almost five months.

The FTSE Bursa Malaysia KLCI Index slid 0.6 per cent to 1,598.17 in Kuala Lumpur to its lowest close since June 28, after losing as much as 0.7 per cent earlier. It was the third- biggest drop among Asian benchmark gauges. Petronas Gas Bhd tumbled 5.7 per cent, leading declines in the index. Axiata Group Bhd and YTL Corp retreated more than 1.7 per cent.

The MSCI Asia Pacific Index advanced 0.4 per cent today after European officials reached an agreement on aid for Greece. Malaysia's KLCI index has fallen every day except two since closing at a record on Nov. 1, losing 4.6 per cent in that time, while the MSCI Asia Pacific has gained 1.6 per cent. Trading volumes on the KLCI are about 19 per cent above the 100-day average, data compiled by Bloomberg show.

"The Malaysian market's defensive attribute is probably less appealing now," David Ng, who oversees RM18 billion (US$5.9 billion) as chief investment officer of Hwang Investment Management Bhd, said by phone in Kuala Lumpur. "Global indicators seem to suggest that the global economy is improving. Malaysia is traditionally defensive. There is probably some rotation out of Malaysia by funds."

The average yield of stocks in the FTSE Bursa Malaysia KLCI Index was 3.6 per cent, compared with 2.9 per cent in the MSCI Asia Pacific Index, according to data compiled by Bloomberg.

The Malaysian gauge trades at 14 times reported profit, a 12 per cent discount versus the MSCI Asia Pacific Index, which is the widest gap since June 2010, according to data compiled by Bloomberg. The discount was 5.4 per cent when the KLCI Index closed at an all-time high on Nov 1.

At its Nov 1 record, valuations were at a 15-month high of 15.4 times. The index jumped 2.2 per cent in October, the biggest monthly gain since February, compared with the MSCI Asia Pacific Index's 0.3 per cent drop.

Until the market slump this month, Malaysian stocks had withstood the worldwide selloff this year as Europe's debt crisis and concerns over global economic growth drove investors to less risky assets. Kuala Lumpur has been home to three of Asia's four biggest initial public offerings this year including palm oil producer Felda Global Ventures Holdings Bhd, which raised US$3.3 billion.

Malaysia's government has bolstered spending on infrastructure and stepped up efforts to spur domestic consumption ahead of national elections that must be held by early 2013. Gross domestic product growth may expand by as much as 5.5 per cent next year from an estimated 5 per cent in 2012, Malaysia's finance ministry forecast in a report in September.

Prime Minister Datuk Seri Najib Razak, who took over as prime minister in 2009, unveiled a program in 2010 that pledged US$444 billion of private sector-led investments. He cut personal income tax, raised civil servants' minimum pensions and repeated cash handouts to low- income households in his budget speech in September, after increasing civil servants' salaries in the past year to boost domestic consumption.

Heightening risks from Malaysia's general election may have caused investors to sell stocks to lock in profits they made earlier this year, Choo Swee Kee, who oversees the equivalent of about US$230 million as chief investment officer at TA Investment Management Bhd, said by phone in Kuala Lumpur.

"With most fund managers sitting on pretty decent gains and the possibility of elections coming in a short two, three months later, it may trigger profit-taking activities," Choo said. "It's getting very close to that so maybe people feel it's about time to turn a bit cautious."

The current parliament will end its five-year term on April 28, 2013.

The Malaysian gauge has tumbled 4.5 percent this month, compared with the 1.5 per cent gain in the MSCI Asia Pacific Index, and 0.3 per cent increase in the MSCI Emerging Markets Index in the same period.

"We think it's nothing to do with fundamentals and mainly it's about technical and people are realising profits," Tan Lip Kwang, who helps manage the equivalent of US$1 billion at KandN Kenanga Holdings Bhd, said by phone. "They might re-position next month." -- Bloomberg