The euro slipped and Asian stocks tumbled in thin trading yesterday due to doubts about an enormous European bailout hammered out at the weekend to avert a crippling debt default by Greece.
Australian stocks also suffered after the government announced plans for an extraordinary tax on massive profits at mining companies, while fresh measures to curb red-hot property lending in China weighed on Hong Kong.
RESCUE
The EU and the IMF on Sunday endorsed the 110 billion euro (US$145.6 billion) rescue package, which is conditional on a swathe of painful cuts and tax rises by Greece.
However, the bailout must now pass through eurozone member parliaments, including that of Germany, where public resistance to the rescue package runs deep and where a major state election is due on Sunday.
“We still need the German parliament to approve [the bailout] and the other issue is the German election,” said Philip Wee, a senior currency economist with DBS Group Research in Singapore.
The euro rallied last week in anticipation of the bailout, but it is “still too early” to tell if the EU’s commitment will shore up the currency, Wee said.
The euro bought US$1.3239 at 0550 GMT in Asia, down from US$1.3294 late in New York on Friday, paring back early gains that saw it climb as high as US$1.3332.
“Although Greece has had a lifeline from the IMF ... the market is not assured that the worst has passed,” said Thio Chin Loo, a senior currency analyst with BNP Paribas in Singapore.
Athens was desperate to get the bailout agreed before it faces a critical debt repayment on May 19.
However, Greek unions vowed to battle the painful measures, which include deep cuts to wages and pensions, potentially doing further damage to the struggling economy.
PROPERTY BUBBLE
Hong Kong shares closed down 1.41 percent, or 297.23 points, at 20,811.36 a day after China ordered banks to increase the amount of money they must keep in reserve, as it tries to restrain new lending to avoid a damaging property bubble.
The People’s Bank of China hiked the reserve ratio for commercial banks by 50 basis points effective May 10 — its third increase since the beginning of the year.
The move raises the standard reserve ratio for major banks to 17 percent of deposits, though the rate can vary for each bank.
Mainland property companies and banks in Hong Kong were hit.
At the close of Hong Kong trade, China Construction Bank (中國建設銀行) and Industrial Commercial Bank of China (中國工商銀行) both dropped 1.6 percent, while among developers China Resources Land (華潤置地) dived 5.1 percent and China Overseas (中國海外集團) fell 3.8 percent.
Shanghai was closed yesterday for a public holiday, as was Tokyo.
Sydney ended 0.46 percent, or 21.9 points, lower at 4,785.5, as mining stocks were hit by news of Canberra’s 40 percent tax on extraordinary profits in the sector, which has boomed thanks to Asian demand led by China’s hectic growth.
BHP Billiton fell 2.99 percent to A$39.53 (US$36.60) and Rio Tinto fell 4.3 percent to A$69. Singapore slid 0.97 percent, in line with a weaker Wall Street.
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