KUALA LUMPUR (Nikkei Markets) -- Shares in Singapore and Malaysia declined on Wednesday as overnight selloff on Wall Street spilled over to Asia and Europe after U.S. bond yields breached the 3.0% mark for the first time in four years.
The Straits Times Index dropped 0.5% to close at 3568.01, while the FBM KLCI ended 0.7% lower at 1851.93. In Singapore, shipbuilders and banking stocks led the decline, while consumer and industrial stocks dragged Malaysia's market down.
"Similar to the sell-off in February when yields tipped 3%, I feel it will be a minor blip in the road," said Oriano Lizza, a trader at CMC Markets. "A reversal or correction is a bit early to call but it's safe to say that the market is extremely fragile."
The yield on 10-year U.S. Treasury note rose to about 3.01%. Globally, investors and analysts monitor the rate as an indicator of U.S. inflation expectations and growth outlook of the world's largest economy.
Higher Treasury yields - meaning that prices on U.S. government debts are falling - usually weighs on equities as investors shift their holdings into bonds that now offer better returns. That could push up broader interest rates, hurting companies with large borrowings.
"Foreign funds are getting out of Malaysia partly due to fears that increased interest rates could impact highly leveraged companies, including those in the property sector," said Phua Lee Kerk, chief strategist at Phillip Mutual. "There are also concerns of weaker tech earnings."
Oil prices fell overnight amid easing worries that the U.S. might reimpose sanctions against Iran. On Tuesday, Donald Trump and Emmanuel Macron pledged to seek stronger measures to contain the oil-exporting country.
Rig-builders came under pressure and edged lower. Keppel Corp lost 2.2%, while Sembcorp Industries dropped 2.5%. In Malaysia, Sapura Energy fell 5.7% and Malaysia Marine and Heavy Engineering Holdings was down 3.1%.
This month, top smartphone suppliers including Taiwan Semiconductor Manufacturing and Corning have warned that demand for smartphones are softening, adding to earlier concerns of rising risk of weaker sales of Apple's iPhone X.
Unisem (M), a Malaysian semiconductor firm, plunged 18% after reporting an 87% drop in first-quarter net profit weighed by currency losses and lower product margins. Inari Amertron, Malaysia's most valuable tech stock and part of the Apple smartphone supply chain, lost 3.8%. Apple is due to announce corporate earnings this week.
Transport giant ComfortDelGro closed 0.9% higher following a media report that it was exploring potential tie-up with Indonesia's ride-hailing app Go-Jek.
Test handling machine supplier AEM Holdings closed 4.2% lower even after reporting a 98.6% on-year rise in first-quarter earnings to S$8.2 million ($6.2 million) on the back of higher sales and stronger profit margin.
Beleaguered commodities trader Noble Group lost 5.1%. On Wednesday, its chairman Paul Brough asked shareholders to support the current board and its proposed debt restructuring plan that Goldilocks, a significant shareholder, opposes.
-Joannah Perez and Alexander Winifred