Rising jitters over a possible U.S. military strike against Syria slammed Asian markets for a second day, pushing the Philippine stock market down as much as 6% and the Indian rupee to a record low.
The selloff across the region adds to recent turmoil amid worries that the U.S. may pull back on aggressive monetary stimulus that had benefited many of these emerging markets until just a few weeks ago. Speculation about intervention in Syria rose overnight as more evidence emerged that the Middle East nation has used chemical weapons against its own people.
"We have rising geopolitical risks with elevated valuations and the potential unwinding of the stimulus that has pushed markets higher, and this is all combining into a perfect storm," said Matthew Sherwood, head of investment market research at Perpetual in Sydney.
The emerging-market rout has led to a withdrawal of funds from Asia, with foreign investors net selling a total of $3.1 billion in equities in August, according to HSBC research.
Many of the biggest moves in the region were seen in India and Southeast Asia, with the rupee banging down to a fresh record low against the dollar.
European stock markets on Wednesday morning continued the negative tone seen in Asia.
Early in European trading, the U.K.'s FTSE 100 traded down 0.4%, the DAX in Germany was down 0.5% and France's CAC 40 was 0.2% lower.
The majority of the heavy losses were in emerging markets. In Turkey, the benchmark ISE National 100 dropped by 1.4%. Dubai's benchmark DFM stock index tumbled more than 5%, extending the previous session's 7% decline. The Turkish lira slid 2.2% to a record low of 2.0407 per dollar.
The rupee was last at 68.27 to the dollar compared with the previous record low of 66.24 reached Tuesday. India's currency has lost more than 20% against the dollar since May, due to concerns that the country will find it hard to close its wide current-account deficit. The latest fall was sparked by a bump in oil prices caused by the concerns over Syria.
In addition, Malaysia's ringgit hit a fresh three-year low against the dollar, and Indonesia's stock market fell 2.5%.
The Philippines, the region's hardest-hit market, was down 3% in late trade ahead of second-quarter gross domestic product numbers, scheduled for release Thursday. In Indonesia, the central bank called a special meeting of its board for Thursday, in an attempt to stop a slide in the local currency.
Crude-oil futures spiked for a second day, with the front-month Brent contract hitting an intraday high of $117.34 a barrel in Asian trade. Recently, ICE Brent was $1.42 higher on the day at $115.78 a barrel. Nymex WTI also gained more than a dollar, to an 18-month high above $110 a barrel.
If the Syria conflict spreads to oil-producing countries in the region, Brent is expected to pass its 2013 high of $119.17 a barrel and push beyond $120 a barrel, Newedge Japan Inc. commodity analyst Masaki Suematsu said.
Gold prices continued to rise. Spot gold hit a 3½ month high at $1,433.85 a troy ounce in early trade, up 1.2% on the day. Gold, which tends to hold its value better than other assets at times of heightened risk aversion, is traditionally sought as a hedge against wider market insecurity.
The worries also benefited the yen, traditionally seen as a safe-haven asset in times of stress. It rose 1.5% against the dollar overnight, its largest one-day rise since early July. The greenback was last at ¥97.30 compared with ¥97.03 late Tuesday in New York.
The strong yen translated though into a sharp drop in Japanese stocks, with the Nikkei falling 1.5% to 13338.46.
Shares in PetroChina 601857.SH -0.50% fell sharply Wednesday, down 3.8% in Hong Kong and 0.9% in Shanghai. The company's stock was suspended Tuesday, as the company said three of its senior executives are under investigation by authorities for "severe disciplinary violations" and have resigned.
The sharp fall in PetroChina weighed on stocks in Hong Kong, where the Hang Seng Index fell 1.4%. The company has an 8% weight in the Hang Seng China Enterprises index, which was down 1.9%.
In mainland China, the Shanghai Composite rose 0.2%.
Australia's S&P/ASX 200 dropped 1% to 5089.70, with local mining stocks suffering from the decline in risk sentiment. Rio Tinto fell 2.4% and BHP Billiton was 1.9% lower.
South Korea's Kospi ended down 0.1% at 1884.52.
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