Asian emerging markets slumped yesterday as 10-year US Treasury yields hit a 23-month of 2.75 per cent on the back of better-than-expected US job data.
Fund managers said they expected more falls to come with capital continuing to leave the region as yields on US Treasuries climb amid expectations the Fed will cut back on its stimulus.
"The attraction of US assets is increasing and we see big short-term risks for Asian markets, as foreign capital, especially hot money, flows out of the region," said Yonghao Pu, regional chief investment officer at UBS. Bank of America last week raised its year-end forecast for 10-year Treasury yields to 3 per cent after June employment in the US exceeded projections.
Goldman Sachs over the weekend cut its forecast for the price of gold at the end of 2014 by 14 per cent to US$1,165 per ounce. Bullion prices usually move in the opposite direction to Treasuries.
Some US$7.4 billion exited Asia ex-Japan over the four weeks to July 5, while US and Japanese markets have seen inflows of US$2.9 billion and US$2.3 billion, respectively, during the period, according to Jefferies.
China's benchmark Shanghai Composite Index shed 2.44 per cent yesterday to finish at its lowest level in 41/2 years after mainland media reported that Beijing would allow initial public offerings by approving 30 new listings by the end of the month.
China is set to report June import and export data tomorrow and gross domestic product growth for the second quarter on Monday.
Indonesia's key gauge fell the most among key indices in Asia, losing 3.16 per cent. The Hang Seng Index lost as much as 2.9 per cent when the market opened before closing 1.3 per cent lower at 20,582.19 points.
Material firms and property developers fell the most. The nation's biggest coal producer, China Shenhua, lost 2.5 per cent to finish at HK$19.98. Developer Sino Land shed 3.22 per cent.
"We may see more corrections for Hong Kong before the market stabilises and we see some opportunities," said Pu, adding that bankruptcies in the Chinese electronics, solar, steel, chemical and shipping industries in the second half were expected.