A currency trader walks by a screen showing the Korea composite stock price index at the Korea Exchange Bank headquarters in Seoul. Photograph: Ahn Young-joon/AP
Share prices were sent tumbling across the Asia-Pacific on Monday after Greece’s resounding no vote in the weekend’s bailout referendum raised fears it could be forced to exit the eurozone.
While significant losses had not descended into regional turmoil as Asian markets prepared to close, analysts warned of more trouble ahead depending on the outcome of crisis meetings of European leaders later today and on Tuesday.
Early attention was on how Japan and other key Asian markets would react after Greece overwhelmingly rejected the terms of a bailout offered by the country’s international creditors on Sunday.
Japan’s Nikkei stock index was down 2.3% in afternoon trading at 20063.3, South Korea’s Kospi fell 1.6% to 2,070.89. Hong Kong’s Hang Seng index dropped 4.23% to 24960.73.
In Australia, around $A30bn was wiped off the value of shares as the country’s benchmark ASX200 index fell almost 1.5% at the opening.
In other afternoon trading, Australia’s ASX 200’s fall had been narrowed to 1.2 percent to 5,473.30, while New Zealand’s benchmark slipped 1 percent to 5,785.20. Shares were also lower in Taiwan and Southeast Asia.
As expected, rising fears of a Greek exit from the eurozone sent investors flocking to the yen – considered a safe haven in times of global financial uncertainty.
Early jitters also afflicted the currency markets, with the Australian dollar dipping to a six-year low of US$0.7484 in early trading, although it later recovered to 0.7509. The euro was at 134.91 yen, from 136.31 yen last Friday. The dollar also slipped to 122.58 yen from 123.05 yen.
The single currency was down 0.8% against the US dollar at $1.1015 but off an early low of $1.0967. It later strengthened to $1.1040, still down from its Friday close of $1.1114. The dollar was little changed against the Japanese currency, slipping to 122.54 yen from 122.88 yen on Friday.
Concern that emergency measures taken by China over the weekend would fail to prevent its stock market from crashing – following a 30% plunge over the last three weeks – proved unfounded after shares staged a rally on Monday.
The Shanghai Composite index surged nearly 6% after the market opened, but was trading just 0.7% higher in the afternoon.
Analysts said that regional market panic was unlikely, even after Athens appeared to take a step closer to a “Grexit” by roundly rejecting the bailout terms set by its international creditors But they added that negotiations this week would be critical.
“The Greece no vote is a surprise,” Shoji Hirakawa, chief equity strategist at Okasan Securities, told Bloomberg News. “But the key is that the direction is going toward more talks after this.”
Other analysts said markets had not expected Greek voters to reject the terms of the bailout so emphatically – a move that could see further losses on Monday and trigger an investor rush to US Treasuries or other government bonds that are seen as largely immune to market turbulence.
Markets in Europe were poised to open lower, but seemed unlikely to plunge dramatically according to futures trading. The FTSE was set to fall 90 points while Germany’s Dax was expected to see a bigger drop.
Peter Chatwell at Mizuho International in London said the strength of the no vote was “a shock to the market,” adding that “all safe haven trades should benefit”.
Pavel Molchanov, equity research analyst at Raymond James, said: “The result was clearly a more decisive no than the polls had suggested. This couldn’t be more bearish for equities and commodities alike.”
In one of the day’s more colourful commentaries, analysts at Japan’s Mizuho Bank said the Sunday’s “Greferendum” had turned out to be a “Grief-erendum”.
On what most had expected to be a tricky day for markets around the world, dealers stressed that uncertainty over Greece’s future had not rocked markets as badly as some might have expected.
In a rare glimmer of hope, they pointed to signs that the European Central Bank would step in early with a pledge of extra liquidity. At the very least, the ECB is expected to maintain emergency funding for Greek banks at its current restricted level.
“A lot depends now on what the ECB does with liquidity support for the Greek banks,” said Antonin Jullier, head of equity trading strategy at Citi.
Attention is now turning to how European markets respond later in the day, as well as the outcome of an emergency meeting between German Chancellor Angela Merkel and French President Francois Hollande in Paris on Monday afternoon.
“The ECB has the capacity to limit the spread of contagion … but we might still see a fall of 3% on European markets on Monday,” added Jullier.
Greece’s EU and IMF creditors will discuss their next move on Tuesday.
“If the troika uses this vote to boot Greece from the euro, the risk off trade will likely continue to widen spreads,” said Steve Blitz, chief economist at stockbroker ITG.
“At risk going forward is the possibility of any number of nations seeking to divorce themselves from the euro in order to more easily, in their view, meet the ongoing rush of future obligations tied to pensions, etcetera.”