Southeast Asian stock markets fell sharply on Monday as foreign investors took profits and bailed from the region on fears that policymakers may not be able to catch up easily with rising inflation. The region was home to emerging Asia's best performing stock markets in 2010 and was already vulnerable to profit taking before Monday.
-- Broad selling pulls Philippine market near 3-week lows
Yet the 8 percent drop in Indonesia's benchmark stock index in the past three sessions has spread to Thailand and the Philippines on worries about price pressures in their economies. Ferry Wong, head of Indonesia research at Macquarie Securities in Jakarta, said the central bank was behind the curve on inflation.
"I think some foreign investors were not too comfortable with the central bank's not raising interest rates despite high inflation," he said. Dealers also attributed the region's losses to foreign outflows, which helped push Indonesia's rupiah and the Thai baht each to the lowest since September. Currencies weakened across Southeast Asia.
Indonesia's central bank left its benchmark interest rate at a record low of 6.5 percent last week, a rate it has maintained since August 2009. Most analysts do not expect a rise until April at the earliest, and some are concerned that that may come to late. Indonesia's main stock index lost 4.2 percent on the day, the biggest daily fall since November 2008. Thailand's index dropped 2.4 percent, by 0900 GMT.
The Bank of Thailand seems likely to raise its policy rate on Wednesday to 2.25 percent, the highest in two years, to contain inflation, particularly after core inflation rose more than expected last month to 1.4 percent from 1.1 percent in November.
Foreign investors have sold a net $347 million of Indonesian stocks on Friday and Monday, including $180 million on Monday, the biggest daily total since July 2008, Thomson Reuters data showed. Indonesia was the darling of emerging market investors last year and the stock market attracted $2.2 billion of foreign equity flows after $936 million in 2009.
The index gained 46 percent last year, making it Southeast Asia's best-performing bourse. Thai stocks gained 41 percent last year, the second best. Indonesia's stocks trade at an average 12-month forward price-to-earnings multiple of 14.5, compared with Malaysia's 14.3, the Philippines' 13.5, Singapore's 14.1, Thailand's 12.4, Vietnam's 10.8 and all Asia's 11.3, according to Thomson Reuters's StarMine.
Elsewhere, the Philippine share index fell 2 percent on Monday to its lowest in almost three weeks. Singapore fell 1 percent, Malaysia 0.6 percent and Vietnam 0.3 percent. The MSCI Asia ex-Japan index was down 0.83 percent, led by a 4.6 percent drop in the MSCI index for Indonesia and a 3.5 percent loss in MSCI Thailand. Indonesian banks were among the hardest hit on the day. Bank Central Asia, Indonesia's biggest bank by market value, and Bank Mandiri, the largest bank by assets, both slumped more than 7 percent.
The critical support level of 3,530 being breached confirms 3,780-90 as a triple top with a minimum measured move at 3,280. Indonesia's main index closed at 3,478.55 on Monday.
Among regional underperformers, Thailand's third-biggest bank, Kasikornbank dropped 5 percent, the Bank of the Philippine Islands, the Philippine's largest lender by market value, plunged 4.5 percent.
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