KUALA LUMPUR - Malaysia's ruling party has given Prime Minister Abdullah Ahmad Badawi its "full support" to stay on as leader, Deputy Prime Minister Najib Razak said Monday, after a shock election setback.

"The UMNO Supreme Council has given its full support to Prime Minister Abdullah Ahmad Badawi to remain as the prime minister and UMNO president," Najib said after a meeting of the party's policy-making body.

"And this stance is very important to maintain investor confidence in our country and to allow the party to face all the challenges."

Abdullah has faced calls for his resignation after the unprecedented losses in Saturday's polls, which deprived the government of its two-thirds majority for the first time since 1969 and handed the opposition four more states.

"We hope there will not be any doubt about the leadership in UMNO or any speculation that there would be a leadership change," Najib said after the meeting of the United Malays National Organisation (UMNO).

Abdullah was upbeat after being sworn in for his second term earlier Monday, downplaying the loss of the two-thirds majority, which prevents the ruling coalition from amending the constitution at will.

"We were eight seats short of securing a two-thirds majority but we accept the decision," he said.

"It will not hamper us from carrying out government policies. We have a strong majority," he said, adding that "the security situation in the country is peaceful and there is no sign of any chaos."

Abdullah indicated that UMNO, which leads the ruling Barisan Nasional coalition, was in for a period of introspection.

"UMNO has accepted what happened was a lesson to us and it is a signal that we need to give attention to the expectations of the people, which we need to carry out," he said.

"We do recognise the shortcomings and we will try to introduce new policies so that we can progress."

After the stock market plunged more than 10 percent during Monday's session as investors panicked over the election result, Abdullah expressed confidence in Malaysia's fundamentals.

"The government of Barisan Nasional will be a strong government. We will ensure the economy continues to remain strong. Whatever actions we have taken are working well and has been welcomed by the private sector," he said. - AFP/ir