Indonesia’s Jakarta Composite Index JAKIDX, +0.66% was off 3%, the Philippines PSEi PSEI, -2.88% tumbled 2.9%, and Malaysia’s FTSE Bursa Malaysia KLCI FBMKLCI, -1.12% sank 1%.
Stocks on the Shanghai Composite Index SHCOMP, +0.78% 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 399106, +0.51% lagged.
Elsewhere, Hong Kong’s Hang Seng Index HSI, -1.35% was down 1.4%, South Korea’s Kospi SEU, -0.91% closed 0.9% lower and Taiwan’s Taiex Y9999, -2.12% 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 TMUBMUSD10Y, +0.00% 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.
Currencies under pressureAs investors pulled money out of emerging Asia into U.S. Treasurys, regional currencies were walloped. Indonesia’s rupiah IDRUSD, +1.37977440% was down 0.9% Friday according to Thomson Reuters, and the Malaysian ringgit MYRUSD, -0.6380% was off 1.2%, according to Tullet 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 NIK, +0.18% bucked the regional selloff, rising 0.2% even as the yen USDJPY, -0.52% 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.
Rising JGB yields lift the profits of Japan financial companies, which invest heavily in those assets. Nomura Holdings 8604, +5.11% was 5.1% higher, and Dai-ichi Life Holdings 8750, +8.78% surged 8.8%.
Commodities boostAustralia’s S&P/ASX 200 XJO, +0.79% also rose 0.8%, lifted by a commodities rally.
Japan industrial firms also jumped on expectations they will benefit from Trump’s infrastructure spending. Mitsubishi Heavy Industries 7011, +3.70% was up 3.7% and Kawasaki Heavy Industries 7012, +3.96% gained 4%.
Commodities also continued to rise on these expectations. Prices for copper HGZ6, +5.04% , a core industrial metal, surged 3.6% Thursday and have 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 BHP, +2.13% up 2.1%, Fortescue Metals Group FMG, +4.49% gaining 4.5% and Rio Tinto RIO, +2.44% rising 2.4% on Friday.
A group of plastic surgeons in northern China say they have created an ear for a patient who lost it in a car accident, using his arm as the growing medium.
The Bank of Korea left its base rate unchanged at 1.25% Friday, reflecting uncertainty caused by 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,” Hsieh said. Trump’s protectionist stance should also be a major concern, she says.
“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 says.