Most Southeast Asian stock markets closed lower on Thursday as investors trimmed their exposure to riskier assets after strong US economic data drove up Treasury yields and increased the likelihood of a rate hike in the world's largest economy.
A survey on activity in the United States services sector recorded its highest reading since August 1997, driving up US Treasury yields and the dollar, and sparking speculation that Friday's employment data could also surprise.
The Stock Exchange of Thailand index dropped 12.56 points or 0.72% to 1,729.40, in turnover worth 64 billion baht. The index was hurt by energy stocks PTT Plc and PTT Exploration and Production Plc, down 1.4% and 2.2%, respectively.
Shares of the region's biggest economy, Indonesia, hit a one-month low during the day, while Philippine shares fell to their lowest level in over three months.
Higher US yields is not encouraging for emerging markets as they tend to draw away much-needed foreign funds while pressuring local currencies.
Meanwhile, on Wednesday, Federal Reserve Chairman Jerome Powell said that the central bank may raise interest rates above an estimated "neutral" setting as the "remarkably positive" US economy continues to grow.
The Fed is expected to hike rates again in December, after raising it last week for the third time this year.
Indonesian shares slid 2.1% during the day, extending losses into a fourth straight session.
The index was weighed down by financials and consumer stocks, with Unilever Indonesia falling 4.1% and Bank Central Asia slipping 1.4%.
Philippine benchmark index skidded 1.6% as higher US yields are expected to aggravate the country's growing inflationary concerns.
"Rising yields abroad furthers the inflationary pressure on the Philippines because imports, as a substitute for local supplies, would be more expensive for us," said Jose Vistan, Research Head at AB Capital Securities in Manila.
The country's September inflation data, which is due on Friday, is expected to rise close to 7%, keeping pressure on the central bank to further raise interest rates.
Ayala Land slumped 4.7% and JG Summit Holdings slid 5.1%.
Singapore shares declined 1.1%, dragged down by industrial and financial stocks. Conglomerate Jardine Matheson Holdings slid 2.9% and DBS Group Holdings lost 0.7%.
