The biggest risk for Asian markets is not China's financial instability but a further spike in US treasury yields, says Kelvin Tay, regional CIO at UBS

The biggest risk for Asian markets is not China's financial instability but a further spike in US treasury yields, says Kelvin Tay, regional CIO at UBS. If US 10-year treasury yields hit 3% there will be a large shift in capital out of Asian assets and into safe-haven treasuries. Treasury yields have risen sharply since May, from 1.6% to 2.61%, due to expectations of Fed tapering. Investors pulled $1.5 billion out from emerging market bond funds in the week ended June 5, according to fund-tracker EPFR, while equity funds lost $5 billion, their biggest outflow in almost two years. (VIEW LINK)