(Repeats to more subscribers)
* Fed stimulus end, China weakness fuel broad-based selling
* MSCI Asia ex-Japan slides 3.9 pct in biggest drop since
* HSBC China "flash" PMI surprisingly weak, PBOC still tight
* Asian currencies take a bath, Indian rupee at record low
* U.S. Treasury yields hit 15-mth high, underpin US dollar
(Updates with latest prices, adds Indonesia stocks,)
By Chikako Mogi and Wayne Cole
TOKYO/SYDNEY, June 20 Asian markets buckled
badly on Thursday after the Federal Reserve heralded an eventual
end to free money and China turned the screw on credit even as
factory activity in the world's second-largest economy hit a
Shares, currencies and commodities all crumbled as investors
rushed to unwind trades in emerging markets. Central banks
across the region were busy intervening in foreign exchange
markets trying to put out spot fires, but with only limited
Among a host of unwanted milestones: Asian stocks outside
Japan suffered their biggest daily loss since late 2011, key
lending rates in China reached historic highs and India's
currency carved out a new record low.
"Kaboom is a better word to describe the market," was the
judgement of a trader at an overseas bank in Manila.
MSCI's broadest index of Asia-Pacific shares outside Japan
sank nearly 4 percent, marking its biggest daily
percentage fall since September 2011.
The falls took the index's year-to-date loss to more than 9
percent, much of it suffered in recent weeks as fears of the Fed
tapering back its massive stimulus programme and further signs
of economic weakness in China prompted hefty withdrawals of
cheap money from emerging markets.
Among the biggest decliners was China, where the CSI300
of the leading Shanghai and Shenzhen A-shares listings
closed down 3.3 percent.
In Indonesia, the Jakarta Composite Index slumped
3.7 percent as worries about the inflationary impact of a move
to raise fuel prices further added to selling pressures, while
Indian shares slumped nearly 3 percent.
Most other bourses in the region lost more than 2 percent,
including Australia, Hong Kong, Singapore
, and South Korea.
Japan's Nikkei stock average was off 1.7 percent, a
relatively modest move given its recent wild swings, while
Taiwan stocks <.TWII lost 1.4 percent.
The stress was clear in Asian credit markets, where the
spread on the iTraxx Asia ex-Japan investment-grade index
widened 23 basis points, reflecting the rising cost
of hedging against debt default.
The initial catalyst for the carnage was Fed Chairman Ben
Bernanke, who pulled few punches by signalling a likely end to
asset buying by the middle of 2014.
That sent 10-year U.S. Treasury yields spiralling to a
15-month peak of 2.38 percent, squeezing investors who had
borrowed in U.S. dollars to invest in emerging markets.
"Bernanke was more explicit than markets had expected.
Rising U.S. yields will spur broad dollar buying. The dollar's
direction is now set," said Yuji Saito, director of foreign
exchange at Credit Agricole in Tokyo.
He said the contrast between Fed's shrinking balance sheet
and the Bank of Japan's rapidly expanding holdings would spark
the dollar to resume its climb against the yen.
Indeed, the dollar was already up at as much 98.28 yen
, and was last trading at 97.97.
Adding to the pain, a closely-watched measure of Chinese
manufacturing took a surprise spill and only added to evidence
of tepid economic growth in the second quarter.
The "flash" HSBC China Purchasing Managers' Index contracted
further to 48.3 in June, from May's final reading of 49.2, its
weakest reading since September.
Hardly helping was a surge in interbank lending rates as the
People's Bank of China (PBOC) tightened liquidity even as banks
there clamoured for cash.
"That hardline stance suits the recent government policy of
clamping down on non-essential businesses by financial
institutions, such as shadow banking, wealth management, trust
operations and even arbitrage," said a trader at a major Chinese
state-owned bank in Shanghai.
The Australian dollar cratered to as low as
$0.9164, reflecting China's importance as the resource-rich
country's single biggest export market.
The Philippine peso lost 1.3 percent to 43.80 per
dollar, its weakest since May 25 last year, while South Korea's
won fell 1.4 percent to 1,145.9.
India's rupee hit an all-time low of 59.9850 to the
U.S. dollar, prompting intervention to stem the rot, traders
Elsewhere, dealers also suspected central banks in Malaysia,
Indonesia and the Philippines may have stepped in to curb strong
downward pressure on their currencies.
"If you put the Chinese numbers together with the policy
statements from both, what's clear to me is that the emerging
market currencies, particularly with a commodity bias, will
continue to go down," said Mark Matthews, head of Asia research
at Julius Baer.
Expectations for further falls appeared to be reflected in a
Reuters poll showing short positions in the Indonesian rupiah
and the Malaysian ringgit have risen to the highest levels in
more than four years as investor sentiment toward emerging Asian
DEVELOPED MARKETS OVER EMERGING
Matthews did see a glint of hope on the horizon should the
Fed's confidence in the U.S. economy prove prescient.
"If we are moving towards a more normalised environment,
people need to remember that it's a good thing the U.S. economy
is growing," he said.
"The world we've got accustomed to in the last 10 years of
crisis and central bank intervention is metamorphosing into one
of growth and less central bank intervention."
However, that also meant developed markets would likely
outperform emerging markets for the foreseeable future.
In a rare turn, Japan was one of the developed nations that
seemed to be doing better. A Reuters survey of manufacturers out
Thursday showed confidence at its highest since early 2011, and
that followed surprisingly upbeat news on exports.
The resource-poor nation is also set to benefit from lower
global commodity prices. U.S. crude futures were down
$2.10 a barrel at $96.14 a barrel while Brent fell $2.12
U.S. gold futures for August delivery fell more than
6 percent to $1,290.05 an ounce in Asia on Thursday. Spot gold
was trading at $1,290.16 an ounce.
(This report replaces separate market reports from Hong
Kong, mainland China, South Korea and Taiwan).
(Additional reporting by Asia Bureaus; Editing by Eric Meijer &