Hang Seng Index sinks 3%, led by sell-off in heavyweight HSBC
By Sarah Turner and V. Phani Kumar, MarketWatch
HONG KONG (MarketWatch) — Asian stocks received a thrashing Monday as fears that Greece may not receive further aid and rising worries over Spain prompted a deep, region-wide sell-off, with Hong Kong equities suffering the most.
The dollar jumped against most other major currencies, barring the yen, whose gains against the greenback as well as the euro applied additional selling pressure in Tokyo. Crude-oil and other commodities tumbled.
Japan’s Nikkei Stock Average JP:100000018 -1.86% finished 1.9% lower, South Korea’s Kospi KR:SEU -1.84% dropped 1.8%, Australia’s S&P/ASX 200 Index AU:XJO -1.67% lost 1.7% and Taiwan’s Taiex XX:Y9999 -1.90% slid 1.9%.
China’s Shanghai Composite CN:000001 -1.26% dropped 1.2%, while the Hang Seng Index HK:HSI -2.99% was the region’s worst performer, slumping 3%, or 587.33 points, to 19,053.47 in Hong Kong.
“[Reports of] the halting of a bailout tranche due to failure to meet targets, the European Central Bank decision not to accept Greek debt as collateral, and the visit of the Troika will keep markets nervous as default fears intensify,” said Mitul Kotecha, a strategist at Credit Agricole.
The Troika refers to the European Commission, the European Central Bank and the International Monetary Fund.
A German report over the weekend said that the International Monetary Fund may cut off aid to Greece. Read more on reported IMF Greek aid suspension.
Worries about Spain were also in focus, after the country lowered its gross domestic product estimates from this year through 2014. Reports also said Spain’s Valencia and Murcia regions may ask for Madrid’s financial assistance. See reports of aid for Valencia and Murcia .
“Against this backdrop, we expect market tensions to persist. With the European Central Bank still reluctant to step in, the probability is increasing that Spain will have to ask for additional support, likely in the form of bond purchases by the European Financial Stability Facility,” strategists at Barclays Capital wrote in a report.
The Asian trading day began with a sharply bearish tone after U.S. and European markets ended with steep losses Friday, reflecting concerns that the weak global environment will affect growth and financial flows into the region.
U.S. equity futures pointed to another possible sell-off on Wall Street Monday, with Dow Jones Industrial Average DJIA -0.93% futures sliding 116 points, or 0.9%, to 12,657.00, while Standard & Poor’s 500 Index SPX -1.01% futures shed 11.70 points, or 0.9%, to 1,346.50.
HSBC hit among financials
Financials delivered a big blow to markets across Asia.
In Hong Kong, index-heavyweight HSBC HK:5 -5.68% HBC -3.25% , one of Europe’s largest banks, tumbled 5.7%, while China Life Insurance Co. HK:2628 -4.76% LFC -2.77% plummeted 4.8%.
