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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. It is expected that if US 10-year treasury yields hit 3% there will be large shifts in capital out of Asian assets and into safe-haven treasuries. T-yields have risen sharply since May, from 1.6% to 2.61%, due to expectations of Fed tapering. Investors have already pulled $1.5billion out from emerging-market bond funds (the week ended June 5), according to fund-tracker EPFR, while equity funds lost $5billion, their biggest outflow in almost two years. (VIEW LINK)


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