Asian shares tentative, euro sags as markets eye Greece

30 Jun 2015 | Author: | No comments yet »

Enough about Greece — what does the crisis mean for Asia?.

Thai shares plunged below the psychological 1,500-point level at one time and the baht weakened Monday as investors retreated to safe-haven assets on mounting worries over Greece’s potential debt default and possible exit from the euro zone after European partners refused to extend a credit lifeline.LONDON: Global stocks slumped Monday over fears that Greece may be heading for a eurozone exit, with the single currency area’s debt-laden nations and banking equities hardest hit.

Late Sunday, Greek Prime Minister Alexis Tsipras called off negotiations with creditors and announced he would hold a national referendum to let voters decide on whether to accept the creditors’ latest terms. European, Asian and U.S. markets all sagged as Greece’s decision to hold a referendum on austerity conditions demanded by its creditors in exchange for bailout funds increased the possibility of a Greek default and eurozone departure. In Europe, markets closed in the red, with Frankfurt’s DAX 30 losing 3.56 percent to 11,083.20 points, the CAC 40 in Paris shedding 3.74 percent to 4,869.82 points and London’s benchmark FTSE 100 index of top companies falling 1.97 percent to 6,620.48 points.

This raises the probability of Athens defaulting on a 1.6 billion euro ($1.8 billion) loan repayment to the International Monetary Fund due on Tuesday. The Stock Exchange of Thailand (SET) index began the day with a sharp fall and headed further south to the day’s trough of 1,495.86 points before bargain hunting in the last trading hour helped the market to creep back above the 1,500 threshold by the close. But it was eurozone nations with high debt burdens that were hardest hit, with both Lisbon and Milan plunging more than 5 percent and Madrid slumping 4.56 percent. “We’re seeing a flight for safety in financial markets at the start of the week as investors respond to the actions of the Greek government over the weekend that has set in motion a series of events that may ultimately lead to Greece exiting the eurozone,” said Craig Erlam, senior market analyst at Oanda trading group. “The euro experienced heavy selling … as traders sought the safety of the yen, Swiss franc and gold to protect against the negative fallout from events in Greece.” Greek authorities ordered Athens’ stock market shut Monday, alongside decisions to close the country’s banks for a week and impose capital controls – putting European banks under intense pressure.

The baht briefly slipped to 33.90 to the US dollar in early trade before the euro’s partial bounce-back helped the Thai currency pare some of its loss to stand at 33.82 to the greenback in afternoon trade. Deutsche Bank tumbled 5.81 percent, Banco Santander plunged 6.70 percent, BCP sank 11.11 percent, and Italy’s Monte dei Paschi di Siena (BMPS) lost 10.24 percent.

This could lower gross domestic product growth in the Asia-Pacific region by 0.3% in 2016, according to Rajiv Biswas, Asia-Pacific Chief Economist for IHS Global Insight. “However, in a more severe contagion scenario where vulnerable Eurozone countries such as Spain, Portugal and even Italy could be impacted by contagion and investor doubts about whether these countries might also eventually exit the Eurozone, the Euro could depreciate more sharply,” Biswas wrote in a Monday note. “Global financial markets could suffer more stress due to renewed uncertainty about the Eurozone outlook. The drastic measures to protect Greece’s banking system against the threat of mass panic came after the European Central Bank said it would not increase its financial support to Greek lenders, despite early signs of a bank run. Asia Plus Securities strategist Prakit Siriwattanages said the Greek crisis triggered panic selling, but buying on the dip helped to limit the SET’s loss. But Trinity Securities research manager Nattachat Mekmasin said Greece would have only a minimal effect on Thailand since both countries had low economic activity.

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