Bangladesh police and investors clash as stocks go into free fall

DHAKA - Bangladesh police fired tear gas and water cannon to break up violent protests by investors on Monday after stock trading was halted when prices went into free fall.

The benchmark index shed 9.25 percent in less than an hour of trading, its steepest-ever slide. That followed a 6.7 percent drop on Sunday after the market had been battered for weeks.

Hundreds of angry investors vandalised cars and blocked roads around the Dhaka Stock Exchange, the main bourse, before police moved in.

Investors chanted slogans complaining of manipulation of stock prices by dishonest brokers and traders. Stock market executives and regulators declined to comment on the accusations but were due to give a news conference later in the day.

Prices of shares have suffered a series of slides since early last month after the stock regulator and the central bank took measures to cool the market, prompting some street protests.

The benchmark index has lost more than 27 percent since 5 December.

The central bank had raised banks' cash requirement ratio from 5.5 percent to 6 percent, effective 15 December, to rein in inflation and to curb runaway credit flow, especially to the volatile capital markets.

Call money market rates also hit a record high last month.

Some banks have invested 75 percent of their deposits in the stock market against a ceiling of 10 percent and had been told to get back under the limit by 30 December.

This deadline has now been extended to 15 January.

SE Asia Stocks-Inflation fears trigger broad profit taking

BANGKOK (Reuters) - 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.

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.



“But I’d say this is short-term and I expect the central bank to raise rates by March. My 6- to 12-month view on the market remains positive.”

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.