The riots in Indonesia sent regional markets tumbling across the board yesterday with Tokyo stocks falling 2.3 per cent and Jakarta shares losing nearly 5 per cent.
A break in Wall Street's recent bull run also shook Asian markets and even hit Philippines stocks.
Tokyo stocks were jolted from a two-day holiday to end sharply lower on increasing fears over Japan's economy and the turmoil in Indonesia, brokers said.
The key 225-share Nikkei average closed down 357.26 points.
"Selling increased due to worries over political and social uncertainty in Indonesia," said Okasan Securities chief strategist, Mr Tetsuya Ishijima. He blamed such worries for a drop in shares of Japanese banks.
Jakarta stocks lost 20.54 points at the close to 414.63, the lowest since January 16th when the market chalked 413.92 points. Brokers said the intense anti-government protests in Medan, north Sumatra, and in some major cities in Java, including Yogyakarta, Surabaya and Bandung, made investors stay away.
The Medan riots did not spare the rupiah currency, which fell sharply against the dollar yesterday. Dealers said offshore investors were worried at the situation in Medan, where security authorities seemed to be losing control in three consecutive days of rioting.
"All the good news of a trade surplus and the IMF loan disbursement was overtaken by this unfortunate event," one local bank dealer said.
In South Korea the threat of massive strikes by a militant labour group caused foreign investors to flee the market, plunging it to the year's lowest close.
Singapore shares were weighed down by Indonesia, and by the failure of a major local land sale, which battered property stocks. Thai stocks fell for the fourth consecutive trading day as investors sold on concerns over Indonesia and other issues.
Meanwhile, Indonesian consumer prices rose at an annual equivalent of over 33 per cent in the four months to April, according to official data yesterday.