* MSCI Asia ex-Japan slides 3.5 pct to 9-month low
* U.S. Treasury yields hit 15-mth high, underpin dollar
* China "flash" PMI hits 9-month lows
* Asian credit market spreads widen 23 points
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 spooked
investors rushed to unwind crowded trades in emerging markets.
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 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 3.5 percent, its biggest one-day percentage
drop since November 2011.
Australia's bourse tumbled 2.3 percent while South
Korean shares shed 2.1 percent to seven-month lows.
Stocks in Hong Kong fell 2.5 percent and Shanghai
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 when signalling a likely end to
asset buying by the middle of 2014.
"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 97.07 yen for a
gain of 2 percent in as many sessions.
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
clambered 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 at a three-year low
of $0.9237, having shed three cents in little more than a day,
reflecting China's importance as the resource-rich country's
single biggest export market.
The Philippine peso lost 1.1 percent to 43.700
per dollar, the weakest since June last year, while South
Korea's won fell 1.4 percent to 1,146.6.
"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.
DEVELOPING OVER EMERGING
Matthews did see a glint of light on the horizon should the
Fed's confidence in the U.S. economy prove prescient.
"If we are moving towards a more normalized 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 developing 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.
As a result, Japan's benchmark Nikkei stock average
was off a relatively modest 1.2 percent.
The resource-poor nation is also set to benefit from lower
global commodity prices. U.S. crude futures were down
$1.49 a barrel at $96.75 a barrel while Brent fell $1.47
U.S. gold futures for August delivery fell more than
2 percent to $1,346.00 an ounce in Asia on Thursday. Spot gold
fared a shade better at $1,346.66 an ounce.
(This report replaces separate afternoon market reports from
Hong Kong, mainland China, South Korea and Taiwan).