Mahathir's coalition loses by-election

The Chinese vote was critical in the poll

The ruling government of Malaysian Prime Minister Dr Mahathir Mohamad has lost a bitterly-contested by-election.

It's a big blow when he [Mahathir] cannot even win in his own state

Lim Guan Eng

The loss is seen as a blow for Mr Mahathir, as the seat was contested in his home state of Kedah.

Saifuddin Nasution Ismail of the Keadilan party, or National Justice Party, took the Lunas seat by a wafer-thin majority of 530 votes.

The party is led by Wan Azizah Wan Ismail, the wife of Anwar Ibrahim - the former deputy of Mr Mahathir who was sacked and later jailed.

The PM may be haunted by Anwar

The poll - held a year to the day after the general election - was seen as a popularity test for both sides.

"It's a big blow when he [Mahathir] cannot even win in his own state," said Lim Guan Eng, national vice-chairman of the opposition Democratic Action Party.

"It's in his own backyard. If he cannot win here, he can't win in other places," Mr Lim, a former MP jailed for sedition, told BBC News Online.

Members from parties in Mr Mahathir's coalition argued the result should not be seen as a reflection of the ruling government's popularity, saying the opposition had exploited racism among the electorate.

The poll was held after the incumbent, from Dr Mahathir's coalition, died. Turnout was said to be high, estimated at nearly 80%.

Chinese vote crucial

The win may indicate a slip in support for the government among the Chinese community, which made up over a third of the electorate in Lunas.

Many Chinese are wary of a fundamentalist Islamic party in the opposition alliance

In last year's general election, Chinese votes helped the ruling government retain power as many ethnic Malays - angry with treatment of Mr Anwar - voted for the opposition.

Many Chinese were wary of the opposition alliance, which includes a fundamentalist Islamic party, Pas.

However, a recent controversial government plan for Chinese-language schools may have helped erode support for the government among the community.

Race and religion play a key role in Malaysian politics

Also, earlier in the year, Mr Mahathir had strongly criticised a Chinese pressure group and reaffirmed that the ruling government would retain special privileges for ethnic Malays.

The campaign was marked by bitter in-fighting among the opposition alliance - made up of four parties.

There were accusations of racism when the Keadilan party refused to field an ethnic Indian candidate and selected a Malay.