Malaysia's prime minister, who is facing his ruling coalition's worst election debacle in 40 years, urged people to remain calm on Saturday, the Star newspaper's text message service reported.

Prime Minister Abdullah Ahmad Badawi said he had accepted defeat in elections in some areas, adding that this was how democracy worked, the Star message said.

Badawi's call for  peace comes after Malaysian police fired tear gas and water cannon to disperse an angry crowd of people, mainly supporters of an Islamic party earlier in the day.

Police arrested 22 supporters of Parti Islam se-Malaysia (PAS) after they were attacked with bottles, sticks and stones, and the windscreens of three police cars were smashed following clashes over alleged unregistered voters in Saturday's general election. 

The incident, the worst violence in the election so far, took place in Rusila, the power base of Pas President Hadi Awang.

Malaysia's opposition threatened on Saturday to hand the ruling coalition its biggest upset in 40 years by winning the northern industrial state of Penang, putting Badawi's political future at risk.

The multi-racial National Front coalition is almost certain to get a majority and form the government at the federal level, but it was as yet uncertain of retaining the two-thirds majority it has held for most of its five-decade-long rule.  "It's bad. They have lost Penang," a source close to Badawi said just two and a half hours after polling booths closed at 0900 GMT.

"It's a perfect storm," he added. "Big guns are falling all over the place."

The chief minister of Penang conceded defeat and said he would hand over power to the opposition, one of the state's opposition leaders said.  "He has contacted the governor. He respected the wishes of the people and hoped there are no untoward incidents," said Chow Kon Yeow, head of the Chinese-dominated Democratic Action Party (DAP) in Penang, which was set to lead the new government in the state.

Works minister Samy Vellu, chief of the Malaysian Indian Congress, one of the parties in the ruling National Front coalition, lost the seat he had held for nearly 30 years, because many Indians thought he was out of touch with their concerns.

Chinese and Indians account for a third of the population of 26 million and many complain the government discriminates in favour of Malays when it comes to education, jobs, financial assistance and religious policy.  "This looks like a revolution," said Husam Musa, vice president of the Islamist opposition party PAS, which looked to be winning in northeastern Kelantan state.

"The people have risen and are united. The message to government is, 'Enough is enough'", he told reporters.  About 70 per cent of Malaysia's 10.9 million eligible voters had cast ballots, the country's chief election official said.

"What has happened is there were aspects of unhappiness everywhere - Indians, Chinese and Malays," the source said, adding that price rises and religious disputes had fed the discontent.-Reuters