A Filipino trader talks on his mobile phone in front of an electronic board showing a downward trend in trading at the Philippine Stock Exchange in the financial district of Makati, south of Manila, Philippines on Monday, June 29, 2015. Asian stock markets sank Monday after Greece closed its banks and imposed capital controls in a dramatic turn in its struggle with heavy debts. AP PHOTO/AARON FAVILA
HONG KONG–Asian equities tumbled 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.
China drama
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.
Shenzhen sank more than 20 percent in the two weeks to Friday.
“We have to bear in mind that the interest-rate cut is the fourth in eight months, so the perceived implication of a rate cut on equity markets may have waned,” said Bernard Aw, a Singapore-based strategist at IG Asia.
“The market may be receiving mixed signals on what exactly the PBoC (central bank) hopes to achieve with its rate cut.”
Oil prices were lower. US benchmark West Texas Intermediate for August delivery fell $1.08 to $58.55, while Brent crude for August eased $1.17 to $62.09 in afternoon trade.
Gold fetched $1,177.05 compared with $1,174.05 late Friday.
In other markets:
— Mumbai fell 0.60 percent, or 166.69 points, to end at 27,645.15.
Hindalco Industries fell 3.55 percent to 112.80 rupees, while consumer goods major Hindustan Unilever rose 2.10 percent to 905.00 rupees.
— Bangkok closed down 0.45 percent, or 6.84 points, to 1,511.19.
Kasikorn Bank lost 2.25 percent to 195.50 baht, while Siam Cement fell 0.77 percent to 518 baht.
— Jakarta ended down 0.82 percent, or 40.43 points, at 4,882.58.
Indonesia-based mining firm PT United Tractors Tbk gained 4.39 percent to 20,200 rupiah, while real estate company Bumi Serpong Damai Tbk Pt slipped 4.56 percent to 1,675 rupiah.
— Malaysia’s key index lost 1.08 percent, or 18.55 points, to 1,691.92.
Sime Darby fell 0.12 percent to 8.49 ringgit, Telekom Malaysia dipped 1.65 percent to 6.56 while RHB Capital added 0.14 percent to 7.26 ringgit.
— Singapore fell 1.23 percent, or 40.72 points, to 3,280.18.
DBS Bank dropped 1.07 percent to Sg$20.30 and telecom giant Singtel was unchanged at Sg$4.13.
— Taipei fell 2.39 percent, or 226.47 points, to 9,236.1.
Taiwan Semiconductor Manufacturing Co. shed 2.12 percent to Tw$138.5 while Hon Hai Precision Industry lost 2.32 percent to Tw$96.9.
— Wellington sank 0.86 percent, or 49.63 points, to 5,705.81.
Spark was down 0.71 percent at NZ$2.78 and Air New Zealand lost 2.51 percent to NZ$2.525.
— Manila closed 0.72 percent lower, slipping 54.67 points to 7,567.38.
Universal Robina Corp. fell 0.25 percent to 197 pesos while Ayala Corp. dropped 1.33 percent to 779 pesos.