SINGAPORE – Asia Pacific stocks fell sharply on Friday after falling on Wall Street overnight as a rapid surge in bond yields rocked investor sentiment.
Hong Kong’s Hang Seng Index fell 2.78% in morning trade. Mainland China stocks also fell: the Shanghai Composite fell 1.93% while the Shenzhen component fell 2.717%.
In Japan, the Nikkei 225 fell 2.53% while the Topix index fell 2.03%. South Korea’s Kospi fell 2.67%. Previously, the Nikkei 225 and the Kospi each fell 3%.
The Australian S & P / ASX 200 also posted significant losses as it fell 2.27%.
MSCI’s broadest index for stocks in the Asia-Pacific region outside of Japan was down 2.42%.
Bond yields observed
Investors monitored bond yields during Friday’s session. Overnight, the yield on the 10-year US Treasury bill briefly crossed 1.6% to trade at its highest level in more than a year.
“Yields are rising because investors are bullish. They believe that a strong sustained recovery is imminent and prices will rise when demand picks up again,” wrote Kathy Lien, chief executive of FX strategy at BK Asset Management, in a note dated Thursday.
Investor optimism about the economic outlook has increased recently, driven by factors such as positive vaccine developments as several large economies vaccinate their populations.
“In this environment, bond yields should be higher regardless of whether the Fed raises interest rates,” Lien said.
US bond yields fell on the morning of Friday morning trading hours in Asia. The yield on the 10-year government bond was last at 1.4888%, while the yield on the 30-year government bond was 2.2673%. The returns move inversely to the prices.
In the Asia-Pacific region, the 10-year Australian bond yield rose to 1.861%. The yield on the 10-year Japanese government bond also rose to 0.166%.
Tech stocks are falling
Investors also watched technology stocks in the Asia-Pacific region.
Hong Kong-listed stocks of Chinese tech companies plunged in early trading: Tencent fell 3.04%, Xiaomi fell 4.28%, Alibaba fell 4.68%, and Meituan fell 5.83%. The broader Hang Seng Tech Index in the city also fell more than 5%.
The Japanese conglomerate SoftBank Group posted a price decline of 3.14%. In South Korea, the shares of the industry heavyweight Samsung Electronics fell by 3.52%.
Those losses came after the tech-heavy Nasdaq Composite fell 3.52% overnight on Wall Street to close at 13,119.43 – its biggest sell-off since October 28.
The Dow Jones Industrial Average also fell 559.85 points to end its trading day at 31,402.01 while the S&P 500 fell 2.45% to close at 3,829.34.
Currencies and oil
The US dollar index, which tracks the greenback versus a basket of its peers, came in at 90.365 after earlier rising below 90.
The Japanese yen was trading at 106.27 per dollar after weakening from below 105.6 against the greenback earlier this week. The Australian dollar changed hands at $ 0.785, below the over $ 0.792 level seen earlier in the week.
Oil prices were lower on the morning of trading hours in Asia and the international benchmark’s Brent crude oil futures fell 0.75% to $ 66.38 a barrel. The US crude oil futures fell about 1% to $ 62.85 a barrel.
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