The Hong Kong Hang Seng closed 1.2% lower, while Brazil’s Bovespa and Mexico IPC were down 3% and 2% respectively.
Only Japan’s Nikkei 225 had a muted response to market fears, down 0.2%, mainly because the bad news has already been priced in, with the market has down just over 9% in the past month.
Currencies were also impacted, with the Mexican peso and Brazilian real down 0.67% and 0.71% against the US dollar respectively. The real briefly touched a four-year low against the dollar and the Indian rupee fell to a record low down 0.5% versus the dollar.
Most Asian pacific currencies were also lower, with the exception of the yen , which strengthened by almost 3%.
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Outflows
Funds in the region have also been hit, with $4bn redeemed from emerging market equity funds and $1bn from EM bond funds in the week to 5 June, according to EPFR Global.
Outflows from EM bond funds were driven by the first outflows from funds with local currency mandates since Q3 last year and the biggest outflows from hard currency EM funds since the second quarter of 2007.
Adding to the fears of the Federal Reserve unwinding its asset purchasing programmes, was disappointment the Bank of Japan left its unchanged.
BofA Merrill Lynch’s global research GEMs daily report said: “Treasuries continue to display high volatility, with the 10-year bond yield falling from an intraday high of 2.3% to 2.18%. Interest rates and currencies in emerging markets had big swings as well.
“Focus today will be on euro area industrial production; inflation in Germany, France and Spain; and rates decisions in New Zealand and Korea, both of which are expected to remain on hold.”
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