Asia markets hit by Greece fears, rate cut boosts China stocks

[HONG KONG] Asian equities and the euro tumbled Monday on fears Greece will crash out of the eurozone after Athens called off debt reform talks and announced a referendum on creditors' proposals next weekend, days after a repayment deadline.

Tokyo sank 2.25 per cent, Sydney shed 1.62 per cent, Seoul lost 1.17 per cent and Taipei was 1.70 per cent lower.

Hong Kong was down 1.11 per cent, but Shanghai added 2.31 per cent.

Mainland Chinese shares rebounded from Friday's plunge of more than seven percent after the country's central bank announced another interest rate cut, its fourth since November.

Greek Prime Minister Alexis Tsipras at the weekend stunned world markets when he announced the national poll for July 5 in which voters will be asked to decide on creditors' reform proposals, as five months of talks failed to find common ground.

The EU and IMF responded by rejecting a request 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.

Mr Tsipras has now imposed capital controls throughout the country to avoid flight of cash, with banks closed until July 6 and ATM withdrawals limited to 60 euros a day.

Speaking on national television on Sunday evening, Mr 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 chaotic bank run.

The euro tumbled to US$1.0952 and 135.38 yen in early Asian trade, from US$1.1160 and 138.26 yen in New York at the end of last week.

The dollar was at 122.96 yen against 123.89 yen in US trade, with investors rushing to safer investments.

"In the face of pressure from the eurozone to accept austerity measures, the Greeks answered that it's hard to live just on water," Mitsuo Shimizu, deputy general manager at Japan Asia Securities Group Ltd in Tokyo, told Bloomberg News.

"Carrying out a referendum buys the Greek side some time. Digesting the worst-possible scenario of a Greek default, global stock markets could fall 1 to 2 per cent today."

Gold fetched US$1,183.01 compared with US$1,174.05 late Friday.

AFP