Asian Shares Slide After U.S. Drop

Asian shares started the week notably weaker as investor anticipation continued to build regarding a pause in global central banks' easing policies, which have helped prop up asset prices.

Emerging markets in Asia are particularly vulnerable to a rate increase in the U.S., as better returns there could prompt a flight of capital from less-developed locales. But some say strong growth and the potential for earnings to pick up faster in Asia will temper any sharp withdrawals.

After the biggest stock declines in the U.S. on Friday since the initial post-Brexit drops, and following a summer devoid of volatility there, Australia's S&P/ASX 200 traded nearly 2% lower Monday morning after its biggest decline in five weeks on Friday. Japan's Nikkei Stock Average was down 1.2%, and Korea's Kospi dropped 1.5%.

Hong Kong's Hang Seng Index opened 2.4% lower after last week's 3.6% jump. The Shanghai Composite started down 1.6%.

"Friday's market adjustment to the possibility of higher rates has continued in early Asian trade, with a sharp jump in Australian bond yields and a weaker opening" in Asian oil trading, said CMC Markets chief market analyst Ric Spooner.

Commodity names were outperforming to the downside in Australia, with big miners BHP Billiton Ltd. and Rio Tinto Ltd. off 3.2% and 2.1%, respectively.

One bright spot Monday morning was Japanese life insurers, gaining on expectations that their investments abroad would yield higher returns. Dai-ichi Life Insurance Co. rose 1.5% and T&D Holdings Inc. gained 1%.

Monday's selloff comes as investors in the U.S. on Friday sold shares of high dividend-payers in utilities and telecoms—which have been favorites as yield plays, given the low-rate environment.

Federal Reserve Bank of Boston President Eric Rosengren said Friday "a reasonable case can be made" for tightening interest rates to avoid overheating the economy.

Fed governor Lael Brainard is scheduled to speak Monday, a day ahead of the blackout period on public comment that begins before next week's FOMC meeting.

In the bond market, yields on 10-year Australian benchmark debt hit 12-week highs Monday as investors bet on a higher rate environment. Yields also rose on long-term Japan government bonds amid lingering speculation that the Bank of Japan may begin pulling back on its aggressive easing policies.

Robb M. Stewart, Hiroyuki Kachi and Kosaku Narioka contributed to this article.

Write to Kenan Machado at [e-mail]

(END) Dow Jones Newswires

September 11, 2016 22:45 ET (02:45 GMT)

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