AirAsia Bhd, Southeast Asia's biggest budget carrier, tumbled the most in almost 21 months in Kuala Lumpur trading amid speculation overseas investors are selling the shares.

AirAsia slid 6.5 per cent to RM2.75 at 3:15 p.m. local time, set for its steepest drop since April 27, 2009. The 10-day implied volatility on the stock rose to 63, the highest level since Aug. 17.

Shares of Kuala Lumpur-based AirAsia have more than doubled in the past year, with foreign investors owning 51.6 per cent of the company as of December, a gain from 48.1 per cent in June, the carrier said Jan. 14. AirAsia's 'fundamentals are very, very good' and there is 'no major concern' over today's share slump, chief executive officer Tony Fernandes said in an e- mailed response to a Bloomberg News query.

'The more prominent reason would be foreign selling; it's a reallocation of portfolio funds, not so much a stock-specific issue,' Joshua Ng, an analyst at RHB Research Institute Sdn Bhd in Kuala Lumpur, said by telephone. 'When you have a high foreign ownership, and when the stock goes up it can be dramatic, the same way will happen when it falls.'

The FTSE Bursa Malaysia KLCI Index lost 0.4 per cent, mirroring declines in Southeast Asian markets including Indonesia, the Philippines and Thailand. The Malaysian benchmark, which climbed 19 percent last year, is headed for its lowest close since Jan. 3.

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AirAsia carried 13 per cent more passengers in 2010 than a year earlier, the company said in a statement today. Its load factor rose to 78 per cent from 75 per cent in 2009, with 25.7 million passengers carried, the airline said.

The selloff in AirAsia was 'sentiment-driven' and may have come from foreign investors who last week sold shares in European rivals such as EasyJet Plc and Ryanair Holdings Plc, Mohshin Aziz, an analyst at Maybank Investment Bank Bhd, wrote in a report today.

EasyJet, Europe's second-biggest discount airline, tumbled 16 per cent on Jan. 20 after the Luton, England-based company said its first-half loss may double as fuel costs rise and icy weather and strikes cause flights to be canceled. Shares of Dublin-based Ryanair dropped 6.5 per cent the same day.

Some of AirAsia's foreign investors may also be EasyJet and Ryanair stockholders, who decided to 'realize profits' in the Malaysian company after the European carriers' share declines, Mohshin wrote.

The slump in AirAsia represents a 'wonderful opportunity' to buy the stock given the company's prospects and cheaper valuation, Mohshin said. AirAsia trades at a discount of 40 percent to 47 per cent against its peers based on their price- earnings ratios, he said. - Bloomberg