By Willa Plank
Emerging markets in Asia sold off sharply on Friday after U.S. Treasury yields rose overnight.
Indonesia's Jakarta Composite Index was off 3.0%, the PSEi in the Philippines tumbled 2.9% and Malaysia's FTSE Bursa Malaysia KLCI sank 1%.
In Shanghai, stocks entered a technical bull market on Friday, closing 20% higher than a low reached on Jan. 28. Broad-based gains, in particular brokerage stocks in the afternoon, helped to consolidate the market's strength. Infrastructure-related stocks jumped, while smaller-cap shares in Shenzhen lagged.
Elsewhere, Hong Kong's Hang Seng Index was down 1.4%, South Korea's Kospi closed 0.9% lower and Taiwan's Taiex fell 2.1%.
"Global investors are favoring conditions in the U.S. market," said Alex Wijaya, senior sales trader at CMC Markets, pointing to soaring U.S. Treasury yields. "We are seeing a general flowing to the U.S."
The yield on the benchmark 10-year U.S. Treasury note climbed to 2.118% overnight from 2.070% Wednesday. That came on the back of the largest one-day rise in the 10-year yield in more than three years on Wednesday.
Rising U.S. Treasury yields act a floor for a number of U.S. assets, raising for the prospect for returns from many U.S. securities. This had the effect of pulling money out of Asia, analysts said.
"We think there is some heightened concern in Asia [about outflows] as well as inflation," said Cynthia Wong, head of emerging markets trading for Asia-Pacific fixed income and currencies at Société Générale.In the emerging markets, currencies, equities and bonds tend to move together, said Tareck Horchani, deputy head of Asian-Pacific sales trading at Saxo Capital Markets.
As investors pulled money out of emerging Asia, regional currencies were hit hard. Indonesia's rupiah was down 0.9% against the U.S. dollar Friday, according to Thomson Reuters, and the Malaysian ringgit was off 1.2%, according to Tullett Prebon.
The rupiah's fall forced the Indonesian central bank to defend the currency Friday, according to Bank Indonesia Senior Deputy Gov. Mirza Adityaswara.
Japan's Nikkei bucked the regional selloff, rising 0.2%, even as the yen gained 0.3% against the dollar.
Yields on 10-year government bonds across the region hit multi-month highs Friday, with those on Japan's benchmark 10-year government bond last at negative 0.032%, up from negative 0.043% late Thursday. That is the highest point since Sept. 21.
RisingJGB yields lift the profits of Japan financial companies, which invest heavily in those assets. Nomura Holdings was 5.1% higher and Dai-ichi Life Holdings surged 8.8%.
Australia's S&P/ASX 200 also rose 0.8%, lifted by a commodities rally.
Japanese industrial firms also jumped on expectations that they will benefit from U.S. President-elect Donald Trump's promises about infrastructure spending. Mitsubishi Heavy Industries was up 3.7% and Kawasaki Heavy Industries gained 4%.
Commodities also continued to rise on these expectations. Copper, a core industrial metal, surged 3.6% Thursday and has risen 7% since the U.S. election. Iron ore jumped 4.4% to a two-year high Thursday.
This has lifted Australian miners, with BHP Billiton up 2.1%, Fortescue Metals Group gaining 4.5% and Rio Tinto rising 2.4% on Friday.
The Bank of Korea left its base rate unchanged at 1.25% Friday, reflecting uncertainty caused by Mr. Trump's surprise victory, said Barclays economist Angela Hsieh.
"There are significant near-term uncertainties in the first few weeks after the election, as markets are waiting for President-elect Trump to lay out his policy directions," Ms. Hsieh said. Mr. Trump's protectionist stance should also be a major concern, she added.
"The situation could be further complicated if the Korea-U. S. Free Trade Agreement came to be renegotiated, but we think it would be too early to call," she said.
Biman Mukherji, I-Made Sentana, Stephanie Yang, Kosaku Narioka, Robb M. Stewart, Kwanwoo Jun, Rachel Rosenthal and Christopher Whittall contributed to this article.
Write to Willa Plank at email@example.com
(END) Dow Jones Newswires
November 11, 2016 03:21 ET (08:21 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.