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UnNightly News: Asians Markets Take a Tumble

January 13, 2011

Investing in ’emerging markets’? Bad news from the Asian sector today. This is an example of what inflation can do to everyday food items.

The Indian stock market has fallen more than 7 percent from a record high set in November, as investors have grown increasingly concerned about inflation and corruption scandals that have paralyzed the country’s Parliament. The Nifty 50 stock index did close up 1.9 percent on Wednesday, but that came after a six-day losing streak.

Meanwhile, the stock market in Bangladesh, which jumped 96 percent last year, has tumbled 27 percent in recent weeks after regulators tightened rules to limit speculation. That market, which went into a free fall on Monday, setting off riots, recovered some of those losses in the last two days after the government eased regulations to make it easier for investors to borrow money. Stock markets in Thailand, Indonesia and the Philippines have also fallen in recent days, though not as sharply.

Many countries are battling high and still-rising inflation, especially in food and energy, and their policy makers are worried about bubbles forming in their financial systems, said Russell Napier, a strategist at the investment firm CLSA in London.

“Inflation will be an endemic problem in the emerging markets,” Mr. Napier said. “We are not going to solve this inflation in a quarter or two quarters.”

In India, prices remain stubbornly high even as the country’s central bank, the Reserve Bank of India, has raised key interest rates by up to 2 percentage points. A recent surge in vegetable prices has put staples like onions beyond the reach of many consumers. Food prices jumped 18 percent at the wholesale level at the end of December, compared with the same period a year ago.

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