Markets in Asia were sharply lower on Wednesday, as investors scurried into safe-haven plays on global growth concerns, sending bond yields to record lows. Renewed Brexit jitters also sent the British pound tumbling to a fresh 31-year low.

The British pound dropped to a fresh 31-year low early Wednesday amid Brexit concerns, trading at USD 1.2860 as of 11:04 a.m. HK/SIN, after dropping as low as USD 1.2796 earlier.

The tumble began overnight as investors flocked to safe-haven assets such as US Treasurys, the yen and the greenback after three UK real estate funds halted selling and the Bank of England relaxed regulations to encourage banks to lend out more money.

Japan's Nikkei 225 dropped 2.96 percent, after earlier tumbling some 3.2 percent on the back of fresh yen strength. The Japanese yen, a safe-haven asset, traded at 100.71 against the dollar as of 11:04 a.m. HK/SIN, compared with levels near 103 on Friday.

"There's a high level of complacency in dollar/yen trade as the markets have no defined direction other than chasing risk sentiment," said Stephen Innes, a senior trader at OANDA. "I expect further probes lower as the latest Brexit sell-off is simply the tip of the iceberg."

The yen strength saw Japanese exporters tumble, with shares of Honda off 5.9 percent, Toyota down 3.09 percent and Nissan down 3.82 percent.

Australia's ASX 200 was down 1.40 percent, with the energy, materials and the heavily-weighted financials sub-index weighing. South Korea's Kospi dropped 2.02 percent, while Hong Kong's Hang Seng index tumbled 1.85 percent.

Mainland Chinese markets were lower, with the Shanghai composite off 0.15 percent.

"The heady post-Brexit rally looks to be at an end, with all major US and European markets down overnight except the FTSE 100, which moved higher only as a response to the further decline in the pound," said Angus Nicholson, a market analyst at spreadbettor IG.

Among safe-haven assets, the dollar advanced against a basket of currencies to trade up 96.382, compared with the 95.631 level it traded at on Tuesday during Asian hours.

"We saw investors flock into the safety of US dollars as the liquidation spread to stocks, commodities, the euro, Australian and Canadian dollars," said Kathy Lien, managing director of foreign exchange strategy at BK Asset Management.

The yield on the benchmark 10-year Treasury touched new lows during Asian hours, falling as low as 1.345 percent, extending overnight declines and marking an all-time low according to Reuters Tradeweb data which goes back to 1953.

In Japan, the yield on the 10-year Japanese government bond fell as much as negative 0.271 earlier in the session before climbing back slightly to negative 0.269.

Gold prices advanced, with spot gold up 0.88 percent at USD 1,367.56, compared with levels near USD 1,320 in the previous week. Gold miners in Australia bucked declines in the broader benchmark index to trade up; Newcrest shares advanced 2.79 percent while Evolution Mining was up 7.04 percent.

Adding to risk aversion, stateside data showed factory orders declined 1 percent in May after two straight months of increases. The highly anticipated nonfarm payroll report is due Friday.

Elsewhere, in a speech on Monday, Chinese Premier Li Keqiang said it would not be easy for China to achieve a growth rate of 6.7 percent in the first quarter, according to Xinhua News Agency.

On Tuesday, the Bank of England governor, Mark Carney, sent a clear message to Britain's cautious bankers: They needed to start lending more money. The central bank cut the amount of capital it required banks to hold in reserve, which freed up an extra 150 billion pounds (USD 196 billion) for lending.

Rodrigo Catril, a currency strategist at the National Australia Bank, said the pound had a small reaction to Carney's comments and the sell-off was part of a global flight to safety. "Fears of financial contagion have triggered a demand for safety, dragging core global yields to new historical lows," he said.

Nicholson added that Carney's words could have spooked investors further. "

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First Published:Jul 6, 2016 9:20 AM IST