Asian stocks slump as capital flows back to the US

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.