Chinese shares on the Shanghai exchange have plunged more than 7 per cent due to concerns about the Greek debt crisis. Honk Kong’s Hang Seng and Japan’s Nikkei have also finished the day down, along with key markets in South Korea.
The reason for such an abrupt decline is Prime Minister Alexis Tsipras’ sudden weekend decision to call a referendum on European and IMF proposals for Greek reforms, following which Greece’s Cabinet has decided that banks would remain shut for six business days and restrictions would be imposed on cash withdrawals.
Investors are confident that Greek exit from Eurozone will have tangible negative impact on Asian economic growth due to disruption in trade and financial markets. However, as Rajiv Biswas (IHS Global Insight economist) have said, it would be 0.7 per cent decline at the most, but not 7 per cent, which we have witnessed today. So the Asian equity markets are likely to recover later this week.