(Bloomberg) -- Asian stocks tumbled, with the regional benchmark approaching a two-year low reached mid-July, as investors fled risk assets after the Federal Reserve signaled it will keep raising interest rates to rein in inflation.

The MSCI Asia Pacific Index slumped as much as 2.3%, the most since June 13, with technology, financials and industrials the worst-performing sectors. Key equity gauges in Japan and Taiwan led regional losses, sliding more than 2% each.

Most of the world’s top central bankers, including Chair Jerome Powell, delivered a stern message on the need to curb inflation as they gathered at the Jackson Hole symposium last week. Rates are heading higher and will stay there “for some time,” Powell said in a speech Friday, dashing hopes for investors betting the Fed will shift to rate cuts next year as growth slows.

“Key to whether Asia will suffer more substantially will depend crucially on the direction of the dollar,” said Gary Dugan, chief executive at the Global CIO Office in Singapore. “Our quant model is giving a near-term sell signal on the equity markets.”

READ: Dollar Rises as Traders Mull Hawkish Fed Rhetoric: Inside G-10

Monday’s loss extended the Asian stock benchmark’s year-to-date decline to more than 18%, trailing European and US peers. The region’s equities have faced selling pressure this year amid rising global interest rates and the impact of China’s Covid lockdowns.

“We will probably go through another re-rating, which means equities will fall to the downside, particularly those exposed to growth and those sectors that are rate sensitive,” said Jessica Amir, a strategist at Saxo Capital Markets in Sydney. “For the selloff to stop we will either need inflation to miraculously head south or we need a relaxation of China’s Covid policy.”

READ: China Gloom Stays as Key Earnings Beats Overlooked: Taking Stock

SECTORS TO WATCH

  • Major Asian technology stocks slid after Fed Chair Jerome Powell gave a clear message at Jackson Hole that interest rates will likely remain high for some time
  • Some South Korean defense companies defied a broader selloff in Asia after Hyundai Rotem and Hanwha Defense Systems signed a $5.76 billion agreement to supply tanks and artillery to Poland
  • Shares of Indian digital payment service providers such as Paytm slipped after a report cited Finance Minister Nirmala Sitharaman as saying it wasn’t the right time to impose charges on such transactions
  • Shares of Indian defense-related product makers and service providers rose after the government approved a list of 780 items to be procured from local manufacturers

MARKETS AT A GLANCE

  • MSCI Asia Pacific Index down 2.2%
  • Japan’s Topix index down 1.8%; Nikkei 225 down 2.7%
  • Hong Kong’s Hang Seng Index down 0.7%; Hang Seng China Enterprises down 0.7%; Shanghai Composite up 0.1%; CSI 300 down 0.4%
  • Taiwan’s Taiex index down 2.3%
  • South Korea’s Kospi index down 2.2%; Kospi 200 down 2.3%
  • Australia’s S&P/ASX 200 down 2%; New Zealand’s S&P/NZX 50 down 0.9%
  • India’s S&P BSE Sensex Index down 1.3%; NSE Nifty 50 down 1.2%
  • Singapore’s Straits Times Index down 0.8%; Malaysia’s KLCI little changed; Jakarta Composite little changed; Thailand’s SET down 0.8%; Vietnam’s VN Index down 0.9%; Philippines shut for holiday

ADVANCERS

  • PICC Property & Casualty gained 4.9% in Hong Kong after the firm posted a 1H earnings beat
  • Meituan rose 2.6% after its 2Q results beat market consensus, with brokerages expecting the company’s recovery to continue in the second half

DECLINERS

  • Greentown Service plunged 15% in Hong Kong after 1H net income declined 38% y/y
  • CanSino Biologics slumped 14% in Hong Kong after 1H net income fell 99% y/y

©2022 Bloomberg L.P.