SE Asia markets down on Cyprus turmoil
Emerging-market stocks tumbled to a three-month low in Asia-Pacific and most currencies weakened on March 18 as Europe’s bailout of Cyprus sparked concern of renewed financial turmoil in the world’s second-biggest economic bloc.
Japan’s Nikkei 225 index tumbled 2.7 per cent, Hong Kong’s Hang Seng dropped 2.1 per cent, South Korea’s Kospi shed 0.9 per cent and Australia’s S&P/ASX 200 fell 2 per cent in early trading. Benchmarks in Taiwan and mainland China also fell.
In Southeast Asia, all stock indices dropped and major currencies, including Singapore’s dollar, Malaysia’s ringgit, Thailand’s baht and the Philippines’ peso came under pressure.
Indonesia’s rupiah fell the most in two weeks as investors favoured safer bets than emerging-market assets amid concern an unprecedented levy on bank deposits in Cyprus will reignite Europe’s debt crisis.
“Europe’s debt problem has resurfaced and is roiling investors’ sentiment for risky assets,” Budsares Yunniyom, a fund manager at Asset Plus Fund Management Co., which oversees about $1 billion of assets, said in Bangkok on March 18.
“The Cyprus crisis has demonstrated the unresolved problems among some European countries,” he added.
In Europe, stocks dropped heavily after markets opened. with major banking stocks down between 3 and 4 per cent on average. The euro weakened to $1.29, its lowest mark this year against the US dollar.
The Cyprus bailout deal, in effect from March 19, is highly controversial within the EU. In exchange for a $10 billion rescue plan, a 9.9 per cent tax will be levied on saving deposits of more than €100,000 at Cyprus banks, while a 6.75 per cent rate will be paid on smaller accounts. This, naturally, has caused panic among account holders and triggered a run on ATMs to withdraw savings.
This, in turn, has worsened the situation for cash-strapped banks. As Cypriots heard the news of the tax, they started lining up outside of ATMs to withdraw money. Banks have placed withdrawal limits of 400 euros and many ATMs were running out of cash over the weekend.
[caption id="attachment_7722" align="alignleft" width="300"] People in Cyprus were quick to withdraw money from their accounts after the EU imposed a levy of almost 10 per cent on savings.[/caption] Emerging-market stocks tumbled to a three-month low in Asia-Pacific and most currencies weakened on March 18 as Europe’s bailout of Cyprus sparked concern of renewed financial turmoil in the world’s second-biggest economic bloc. Japan's Nikkei 225 index tumbled 2.7 per cent, Hong Kong's Hang Seng dropped 2.1 per cent, South Korea's Kospi shed 0.9 per cent and Australia's S&P/ASX 200 fell 2 per cent in early trading. Benchmarks in Taiwan and mainland...
Emerging-market stocks tumbled to a three-month low in Asia-Pacific and most currencies weakened on March 18 as Europe’s bailout of Cyprus sparked concern of renewed financial turmoil in the world’s second-biggest economic bloc.
Japan’s Nikkei 225 index tumbled 2.7 per cent, Hong Kong’s Hang Seng dropped 2.1 per cent, South Korea’s Kospi shed 0.9 per cent and Australia’s S&P/ASX 200 fell 2 per cent in early trading. Benchmarks in Taiwan and mainland China also fell.
In Southeast Asia, all stock indices dropped and major currencies, including Singapore’s dollar, Malaysia’s ringgit, Thailand’s baht and the Philippines’ peso came under pressure.
Indonesia’s rupiah fell the most in two weeks as investors favoured safer bets than emerging-market assets amid concern an unprecedented levy on bank deposits in Cyprus will reignite Europe’s debt crisis.
“Europe’s debt problem has resurfaced and is roiling investors’ sentiment for risky assets,” Budsares Yunniyom, a fund manager at Asset Plus Fund Management Co., which oversees about $1 billion of assets, said in Bangkok on March 18.
“The Cyprus crisis has demonstrated the unresolved problems among some European countries,” he added.
In Europe, stocks dropped heavily after markets opened. with major banking stocks down between 3 and 4 per cent on average. The euro weakened to $1.29, its lowest mark this year against the US dollar.
The Cyprus bailout deal, in effect from March 19, is highly controversial within the EU. In exchange for a $10 billion rescue plan, a 9.9 per cent tax will be levied on saving deposits of more than €100,000 at Cyprus banks, while a 6.75 per cent rate will be paid on smaller accounts. This, naturally, has caused panic among account holders and triggered a run on ATMs to withdraw savings.
This, in turn, has worsened the situation for cash-strapped banks. As Cypriots heard the news of the tax, they started lining up outside of ATMs to withdraw money. Banks have placed withdrawal limits of 400 euros and many ATMs were running out of cash over the weekend.
The Cyprus crisis is a representation of how the European Union is still undergoing some instability especially within some specific countries and therefore is affecting other countries outside of the union, such as SE Asia region. It is impressive to see how people have little faith in the banking system as many decided to withdraw their savings from ATMs. If people no longer trust the banking system what does that say about the market? What will come next?