Most Southeast Asian stock markets fell on Tuesday on slow global recovery concerns, a possible rate hike for China and speculation over the imposition of capital controls to tame the rise of the region's currencies. Thailand and Singapore fell 2.8 percent and 0.8 percent respectively, with both hitting two-week lows. Vietnam, the region's worst performer, hit a new 2-1/2 month low, closing 1.5 percent weaker.
"The worries that China may increase its interest rate and possible capital control measures hit the regional markets overall," said Rakpong Chaisuparakul, a market strategist at Bangkok-based KGI Securities. "Also, Euro zone debt crisis and conflict between economists and politicians on the viability of QE2 have contributed as negative factors from the global side."
Euro zone finance ministers will try to find a way to end Ireland's debt crisis on Tuesday, with Dublin resisting pressure to seek a state bailout by signalling that only its banks may need help. Indonesia and Malaysia bucked the trend with gains of 0.5 percent and 0.1 percent respectively. Manila was closed for a holiday. Optimism in the region's emerging markets evaporated amid speculation over capital control to prevent sharp rises in currencies of the respective countries in the region.
On Tuesday, the Bank of Thailand said it is considering stronger capital controls but was weighing them carefully to avoid longer-term damage. Indonesia on Monday said it has been studying the possibility of taxing capital inflows. Foreign investors have been mostly on the selling side on the region's bourses. Jakarta saw a $95 million outflow in the past four straight session including $13.2 million on Tuesday. The Philippines saw a $33.3 million outflow in the last six sessions.
Thailand suffered a $202.7 million foreign outflow in the last five successive sessions, including $23.3 million on Tuesday, Reuters data showed. Analysts said investors are also worried high valuations, which prompted some prominent shareholders to cash out more than $1.9bn from Asia's equity markets last week.
Indonesia is trading at a 15.3 forward price-to-earnings ratio, below all-Asia's 13.5 and expensive than Thailand's 12.4. The Philippines is trading at 13.4, while Singapore and Malaysia are trading at 14.0, Thomson Reuters StarMine data showed. In Jakarta, London-listed investment firm Vallar unveiled its first acquisitions in its quest to build up a mid-tier mining house. It paid $3 billion in cash and new shares to buy stakes in two major Indonesian coal producers Berau Coal Bumi Resources which drove the shares 2 percent higher.