Asian markets hit by Greece fears, Shanghai plunges again

[HONG KONG] Most Asian markets edged higher on Tuesday, enjoying a slight recovery after the previous day's rout, with Greece just hours away from default, while Shanghai's suffered more sharp losses.

The euro edged down and analysts warned of volatility this week as Greece prepares for a Sunday referendum on creditors' bailout reform proposals, which European chiefs say boils down to a vote on whether the nation wants to stay in the eurozone.

Tokyo rose 0.36 per cent, Hong Kong added 0.13 per cent, Sydney gained 0.32 per cent and Seoul was up 0.35 per cent.

Shanghai continued to face heavy selling pressure, dropping five percent after plunging more than 20 per cent from a June 12 peak. Shenzhen lost more than six per cent.

With talks between Athens' leaders and creditors now completely broken down after Prime Minister Alexis Tsipras called the July 5 plebiscite, Greece is widely expected to miss its payment to the IMF due later Tuesday.

"(How) is it possible the creditors are waiting for the IMF payment while our banks are being suffocated?" Mr Tsipras said in a late-evening interview on ERT television in Greece.

Failure to pay will leave the country in default, which could lead to it leaving the eurozone. However, top European leaders including Germany's Angela Merkel France's Francois Hollande and Italy's Matteo Renzi called on the Greek people to vote for the creditors' proposals.

"A 'No' would mean, regardless of the question posed, that Greece had said no to Europe," said EU chief Jean-Claude Juncker, previously Tsipras's closest - and sometimes only - ally in five months of debt talks.

The decision to push ahead with the vote led Standard & Poor's rating agency to downgrade Greece's credit rating deeper into junk territory, saying it was now closer to default.

EURO SURPRISE

The crisis sent markets tumbling across Europe and in New York.

The euro ended Monday higher but edged down again on Tuesday.

It bought US$1.1195 and 137.02 yen in Asia, against US$1.1247 and 137.82 yen in New York.

"Right now the biggest surprise is that the euro is not materially weaker," Matthew Sherwood, head of investment markets research in Sydney at Perpetual Ltd, which manages about US$21 billion, wrote to clients.

"Market expectations are that the Greek situation is manageable even if they exit the union," he said, according to Bloomberg News.

The dollar edged up to 122.67 yen from 122.55 yen.

In China Shanghai continued to slide after running up gains of 150 per cent in the year to June 12, with profit-takers moving in and after authorities tightened up rules on margin trading, in which dealers borrow cash to invest.

The market lost more than three per cent Monday, putting it in a bear market and economists warned of further losses as retail investors cash in and the margin trades are called in.

The losses have also come despite China's central bank at the weekend cutting interest rates for the fourth time since November and also lowering the amount of cash lenders must keep in reserve.

"The correction in the market made investors rather nervous," said Gerry Alfonso, a director at Shenwan Hongyuan Group Co in Shanghai.

"Margin lending remains a significant issue and it is unavoidable to have volatility, even with the supporting measures."

On oil markets, US benchmark West Texas Intermediate for August delivery fell 17 cents to US$58.16 while Brent crude for August eased 13 cents to US$61.88.

Gold fetched US$1,178.95 compared with US$1,177.05 late Monday.

AFP

Read more on the Greek crisis here.