* Market falls as much as 2.2 pct before recovering losses
* AirAsia, CIMB among heaviest losses
* Firms with links to new govt rise sharply (Adds company share prices and updates market position)
KUALA LUMPUR, May 14 (Reuters) - Malaysia’s stock market recovered quickly from an early drop on Monday, while the currency hit a four-month low, in a volatile first session since the stunning election defeat of a coalition that ruled the country for six decades.
Veteran politician Mahathir Mohamad came out of retirement to lead the opposition Pakatan Harapan (Alliance of Hope) to a stunning victory over a ruling party he had once led, defeating prime minister Najib Razak, a former protege he had accused of corruption.
The main Malaysian share index, which has been one of Asia’s best performers this year, fell as much as 2.2 percent in the first few minutes of trade, dragged lower by across-the-board falls in financial, telecom and airline shares, especially those with links to the former government.
Many of the losses were quickly pared, or offset by steep rises in firms linked to the new government, and the bourse was nearly flat after half an hour.
In the currency market, the Malaysian ringgit fell to a four-month low of 3.982 per dollar as onshore trading resumed for the first time since the election last Wednesday.
Investors had anticipated the bearish reaction to the 92-year-old Mahathir becoming prime minister once more - he had retired in 2003 after 22 years in power.
Some analysts are concerned over populist promises his alliance had made during the election campaign, including plans to remove a goods and services tax, scrap toll fees, reinstate fuel subsidies and review Chinese investment deals.
Particulary hard hit in morning stock market trade was AirAsia Group Bhd, whose chief executive Tony Fernandes endorsed the incumbenmt Najib during the campaign. Its shares fell as much as 10 percent at the open before paring some of the losses.
Telecommunications company Axiata Group Bhd, majority owned by state sovereign fund Khazanah, fell 8.5 pct, while bank CIMB Group Holdings Bhd plunged 12 percent. The group chairman of CIMB is Nazir Razak, Najib’s brother.
Bucking the trend were firms with links to the new government. Robert Kuok-controlled PPB Group Bhd rose 8.3 percent, following Kuok’s appointment as an adviser to the new administration.
Packaged-food maker Nestle also rose 3.6 percent. (Reporting by Tom Westbrook, Liz Lee and Praveen Menon; Editing by Raju Gopalakrishnan and Simon Cameron-Moore)