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Malaysian stock index falls sharply

KUALA LUMPUR, Malaysia --Malaysia's stock market index nosedived Tuesday, falling on concerns of a slowdown in the U.S. economy and geopolitical events in the Middle East and central Asia.

The Kuala Lumpur Composite Index fell 35.79 points, or 2.8 percent, to 1,237.08 points. It was the market's largest single day fall since May 2006.

Only 42 stocks on the index posted gains, while 1,123 lost ground. Kuala Lumpur has been one of Asia's best performing markets this year, gaining 17 percent before Tuesday's fall.

Investors were also shaken by a nearly 9 percent drop in China's main stock index.

"There was a lot of news that affected the market," said MIDF-Amanah Investment Bank analyst S. Sharath. "The (rumors) of China going to impose capital gains tax resulted in regional markets falling."

Sharath said escalating tension between Tehran and Western nations over its nuclear program and an attempted suicide bomb attack on U.S. Vice President Dick Cheney in Afghanistan also contributed to the fall.

Markets across Asia also fell sharply after former Federal Reserve Chairman Alan Greenspan said Monday that a recession in the U.S. is "possible" later this year.

"Our economy is also dependent on the U.S. economy, if there is adverse news, exports from our country is going to drop...Investors got spooked," Sharath said, adding there should be a recovery barring any adverse news Wednesday.

Also Tuesday, national carmaker Proton recorded its third straight quarterly loss on lower car sales, higher expenses and one-off costs from restructuring at Lotus, its British-based sportscar unit.

Proton was down 40 cents to 7.30 ringgit, while Bursa Malaysia slid 9.2 percent to 10.80 ringgit on fears the steep decline in share prices would keep retail investors away from the market. Conglomerate Genting Bhd. fell 1.9 percent to 38.75 ringgit on foreign fund selling, while Tanjong was down 3.2 percent to 14.90 percent.