HONG KONG: Asian equities tumbled on Monday on expectations of a Greek eurozone exit after Athens announced a referendum on creditors’ proposals, while Chinese stocks gyrated wildly after losing some 20 percent in the past two weeks.
Shanghai saw a 10 percent swing from gains to losses, extending a painful sell-off since hitting a June 12 peak. A weekend central bank interest rate cut was unable to offset profit-taking and the effects of a tightening of trading rules.
Tokyo ended down 2.88 percent, or 596.20 points, at 20,109.95, Sydney shed 2.33 percent, or 123.4 points, to 5,422.5, and Seoul was 1.42 percent off, giving back 29.77 points to 2,060.49.
Hong Kong tumbled 3.63 percent at one point before ending down 2.61 percent, or 696.89 points, at 25,966.98
Shanghai, which rose 2.5 percent in early trading, slumped by 7.58 percent at one point despite the rate cut, but ended down 3.34 percent, or 139.84 points, at 4,053.03.
Shenzhen, which added 1.77 percent in the first few minutes, closed 6.06 percent lower, giving back 151.56 points to 2,351.40.
China’s strict capital controls and limits on foreign investment mean its stock markets are largely detached from other major bourses. Their recent ascent has been driven by domestic policy factors.
Greek Prime Minister Alexis Tsipras stunned world markets at the weekend when he announced the national poll for July 5 in which voters will be asked to decide on creditors’ reform proposals, after five months of talks failed to find common ground.
The EU and IMF responded by refusing to extend Greece’s bailout beyond its June 30 expiry date, meaning it will default on a key payment and possibly crash out of the eurozone.
Tsipras has now imposed capital controls throughout the country to avoid capital flight, with banks closed until July 6 and ATM withdrawals limited to 60 euros a day.
Speaking on national television on Sunday, Tsipras said the Bank of Greece had recommended a “bank holiday and restriction of bank withdrawals” after the European Central Bank said it would not increase its financial support to Greek lenders despite early signs of a bank run.
European equity markets sank in early trade Monday, with Frankfurt, Paris, Madrid and Milan each losing more than four percent, while London tumbled 2.2 percent. The Athens stock market is closed until July 7.
The euro tumbled to $1.1070 and 136.09 yen Monday, from $1.1160 and 138.26 yen in New York Friday.
The dollar was at 122.89 yen against 123.89 yen in US trade, with investors rushing to safer investments.
“When you don’t know a lot of what could happen, the standard and rational response is to reduce your positions, reduce your risky bets and park your money somewhere safer,” Sam Tuck, a senior currency strategist at ANZ Bank New Zealand, told Bloomberg News.
“The only thing we really do know is we don’t know a lot of what could potentially happen.”
Chinese shares seesawed from black to red after the People’s Bank of China cut rates Saturday and lowered the amount of cash lenders must keep in reserve.
Analysts said the announcement was in response to dramatic stock market falls over the previous two weeks, coming after the main index soared more than 150 percent over the past 12 months.
Shanghai dived more than seven percent Friday—and 18.8 percent in the two weeks after peaking on June 12—as authorities tightened rules on margin trading, while dealers are also worried about stocks’ high valuations. AFP