Malaysia's opposition leader Anwar Ibrahim was bailed on sodomy charges on Wednesday, allowing him to push ahead with his bid for power at a time when the government is embroiled in a bitter race row.

This is the second time Anwar has faced what he calls politically motivated sodomy charges, after being jailed and barred from office for corruption and sodomy in the late 1990s.

He says the new charges are designed to discredit him as he seeks to entice 30 government legislators to join his opposition alliance in the coming days and take power from the coalition that has ruled Malaysia for more than 50 years.

"I am not guilty, this is a lie, this is malicious," Anwar told reporters as he entered the court flanked by his wife and daughters and fellow opposition MPs.

"This is trial by ambush," he said after the court appearance in which he was bailed until September 24, when the judge will decide on a prosecution request to transfer the case to a Kuala Lumpur high court, a move he opposes.

Anwar's bid for power comes after Malaysia's Barisan Nasional coalition was rocked in March elections when it lost its two-thirds parliamentary majority for the first time.

It has since struggled to strike a chord with voters at a time of rising prices and slowing economic growth in this Asian country of 27 million people.

As political tensions have risen, investors have been unnerved. The cost of insuring Malaysia's debt has risen sharply to around $136,500 per $10 million of debt from $90,185 prior to the March election, based on prices for 5-year credit default swaps a barometer of risk.

The government has now been hit by a row over race in a country where ethnic Malays are more than half the population and ethnic Chinese account for around a quarter.

While Malays are politically dominant in Malaysia they lack economic clout and accounted for only 19 percent of the country's wealth in 2006, whereas ethnic Chinese held 42 percent of wealth, official data showed.

A mid-ranking official from the United Malays National Organisation (UMNO), the main government party, recently called ethnic Chinese "immigrants" and on Monday he likened them to Jews in America who wanted political as well as economic power.

The comments have produced a sharp backlash from Chinese parties in the ruling coalition.

UMNO will meet to decide on punishment for the official, but political analysts said that the race row was another sign of desperation from UMNO.

"They have no choice but to rein in on such people, otherwise you are talking of political disempowerment of the Barisan Nasional and UMNO in particular. And this will prove Anwar right that they are doing more good for Malaysia than UMNO," said Bilveer Singh, professor of political science at the National University of Singapore.

Anwar said that the comments had been aimed at stoking racial tensions in order to deflect criticisms of the government's corruption and economic mismanagement.

"I appeal to Malays, Chinese and Indians to remain calm and do not allow the corrupt government to use this to hit against innocent people," he said.

Anwar insisted on Wednesday that he was on track to win power by September 16 and that he would win over the 30 government legislators he needed to do so, even though Barisan has shipped around 50 of its MPs overseas on a study tour.

Anwar's coalition of reformers, Islamists and an ethnic Chinese party has 82 MPs while the government has 140. - Reuters