Forexpros – Asian stock markets were down sharply on Wednesday, with major indices across the continent slumping to multi-month lows as investors cut their exposure to risky assets after talks aimed at forming a coalition government in Greece failed, sending the country to fresh elections.
During late Asian trade, Hong Kong’s Hang Seng Index plunged 3.1%, Australia’s ASX/200 Index sank 2.35%, while Japan’s Nikkei 225 Index dropped 1.2%.
Global equities have been rattled since the outcome of the May 6 elections in Greece threw the future of the country’s international bailout deal into doubt and fuelled fears over a possible Greek exit from the euro zone.
Speculation over the possibility of a Greek exit from the euro zone intensified on Tuesday, as talks aimed at forming a coalition government failed.
A caretaker government will be appointed later Wednesday, with new elections likely in early June, fuelling fears over a potential Greek default and eventual exit from the euro zone.
In Hong Kong, the Hang Seng dropped to a four-month low in afternoon trade, with losses deepening after a mainland newspaper reported flat loan growth for the first two weeks of May by the country’s “Big Four” state-owned banks.
Industrial and Commercial Bank of China saw shares drop 2.3%, China Construction Bank declined 2.4%, Bank of China tumbled 3.35%, while Agricultural Bank of China retreated 1.2%.
Shares in HSBC Holdings, Europe’s largest bank which has the biggest weighting in the Hang Seng Index, dropped 3.35%.
Shares of beaten-up insurance providers and property developers came under pressure, with Ping An losing 3.45%, China Life plunging 4.6%, while Sino Land shares dropped 3.9%.
Hong Kong-based exporters with high exposure to Europe further added to losses, with Esprit Holdings diving 5.2%, Li & Fung shares sinking 5.4% and Cosco Pacific falling 3.2%.
Meanwhile, in Japan, the Nikkei dropped to the lowest level since February 1 in morning trade as exporters with high exposure to Europe came under heavy selling pressure.
Shares in Mazda, the Japanese carmaker with the highest proportion of European sales, slumped 1%, Honda dropped 2.1%, while Canon shares fell 1.1%.
Nippon Sheet Glass, which gets almost 40% of its sales in Europe, fell 3.25% to its lowest level on record.
But mild gains for Japan’s top three banks provided some support, after posting solid net profits in the just ended fiscal year, easing concerns over the impact of the euro zone’s debt crisis on the country’s top lenders.
Mizuho Financial Group tacked on 1.75%, but gains in Mitsubishi UFJ Financial Group and Sumitomo Mitsui Financial Group evaporated, losing 1.4% and 0.35% respectively.
The Nikkei rallied more than 19% in the first three months of the year, buoyed in large part by an unexpected easing announcement by the BoJ in February, but the index has fallen nearly 14% from this year’s high on March 27 as China’s economic growth slowed and on renewed concern about Europe’s debt crisis.
Elsewhere, a sharp fall in commodity prices sent major mining names lower in Australia. Fears over a slowdown in demand for commodities intensified after BHP Billiton said it expects commodity markets to cool further and that investors have lost confidence in the longer-term health of the global economy.
Mining heavyweights BHP Billiton and Rio Tinto retreated 3.9% and 3.75% respectively, gold producer Newcrest Mining dropped 4.15%, iron ore producer Fortescue Metals tumbled 5.1%, while uranium producer Paladin Energy plummeted 9.35%.
Looking ahead, the outlook for European stock markets was sharply lower, after talks aimed at forming a coalition government in Greece failed, fuelling fears that new elections could lead to the country’s eventual exit from the euro zone.
The EURO STOXX 50 futures pointed to a loss of 1.4%, France’s CAC 40 futures dropped 1.2%, London’s FTSE 100 futures declined 1.4%, while Germany’s DAX futures tumbled 1.3%.
Later in the day, the euro zone was to publish official data on consumer price inflation, ahead of a speech by European Central Bank President Mario Draghi.
The U.S. was to produce official data on building permits and housing starts, followed by reports on the capacity utilization rate and industrial production. In addition, the Federal Reserve was to publish the minutes of its most recent policy meeting.
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