Asia: Greek uncertainty hammers stocks despite PBOC rate cut
Asian stock markets closed with heavy losses on Monday, with Chinese equities in bear-market territory, as fears about Greece hammered investor sentiment.
After surging over 2% at the start of the session, the Shanghai Composite plunged 3.34% to 4,053, the Hang Seng index tumbled 2.61% to 25,967, while the Nikkei 225 dropped 2.88% to 20,110.
For the Hang Seng in particular, this was its worst one-day sell-off in over a year.
Over the weekend, Greece’s government called a referendum on the bailout terms proposed by its international creditors, while imposing capital controls on its banks to defend liquidity. Athens said banks will remain closed until after the public vote on 5 July.
After talks with lenders failed at the weekend, Greece has now effectively run out of time to secure funding to help pay its €1.6bn debt repayment to the IMF on Tuesday, the same day that its current bailout agreement expires.
Even an interest rate cut by the People’s Bank of China couldn’t halt the slide on stock markets in Shanghai. In its fourth rate cut since November, the central bank lowered its benchmark lending rate by 25 basis points to 4.85 and the one-year deposit rate by 25 basis points to 2%.
“Developments in Greece have almost completely overshadowed the move by the People’s Bank of China to support the equity markets which have now entered technical bear market territory, having fallen more than 20% in the little over two weeks,” said Oanda analyst Craig Erlam.
“There have been efforts as of late to cool the equity market in China after an astonishing 12 months in which the Shanghai Composite rallied more than 150%, which raised concerns that a painful correction will follow. The efforts have worked, unfortunately too well, which has forced the PBOC to step in and try and halt the freefall,” he said.
Meanwhile, investors had to digest some mixed economic data from Japan during the session as retail sales beat expectations and industrial output disappointed.
Japanese retail sales jumped by 1.7% in May after just 0.3% growth the previous month, beating the 1% consensus forecast. However, Japanese industrial production contracted by 2.2% in May after 1.2% growth in April, surprising analysts who were expecting just a 0.8% decline.
In company news, the parent company of computer group Lenovo, Legend Holdings, finished slightly lower on its stock-market debut in Hong Kong.
The yen gained 1.7% against the euro, pressuring share prices of exporters such as Suzuki Motor, Toyota and Honda lower.
Banks and financial services companies were also registering losses as risk appetite fell.