Asian markets mostly fell on deepening European debt concerns yesterday after 28 Spanish banks were hit with a downgrade as traders remained downbeat ahead of a European Union summit.
Adding to the gloomy sentiment, Cyprus became the fifth eurozone country out of the 17 countries in the bloc to seek a bailout.
Tokyo fell 0.81%, or 70.63 points, to 8,663.99, Seoul was 0.41% off, shedding 7.57 points to 1,817.81 and Sydney closed 0.36%, or 14.5 points, lower at 4,013.3.
Shanghai was flat, closing 2.04 points down at 2,222.07 but Hong Kong rebounded from three days of losses to end 0.45%, or 84.39 points, higher at 18,981.84.
Eyes are on the two-day meeting of EU leaders tomorrow and Friday as they try to overcome their differences to save the troubled euro.
But despite so much at stake—with Italy and Spain now in focus—investors say they do not expect any concrete plan to evolve owing to the divisions between the pro-growth and pro-austerity camps.
“Expectations are very low for the upcoming European summit,” said Tim Waterer, senior trader at CMC Markets in Sydney.
“There is a feeling that nothing concrete is going to come out of it and that we will be none the wiser about the solution to long-term problems,” he told Dow Jones Newswires.
French Finance Minister Pierre Moscovici yesterday said he would be holding talks with his counterparts from Germany, Spain and Italy in the run-up to the summit.
In a fresh blow, ratings agency Moody’s hit 28 Spanish banks with new credit downgrades Monday.
As Madrid formally requested a rescue loan of up to €100bn ($125bn) for the banking sector from its eurozone partners, Moody’s said the banks faced rising losses from commercial real estate loans.
The agency said Madrid’s own lowered credit grade also contributed to the rating cuts.
Moody’s last week cut the ratings of 15 of the biggest names in banking including Goldman Sachs, Barclays, Citigroup, HSBC and Deutsche Bank, citing their exposure to each other and the financial crisis.
On Monday Cyprus, which had a large exposure to Greek government debt, requested financial help from its eurozone partners, following Ireland, Greece, Portugal and Spain.
While it did not specify the amount, local media speculated it would be in the region of €5bn.
In other markets in Asia, Singapore fell 0.34%, or 9.63 points, to 2,805.63; Taipei fell 0.40%, or 28.45 points, to 7,137.93; Manila closed 0.52% higher, adding 26.64 points to 5,193.84; Wellington ended down 0.58%, or 19.80 points, at 3,381.32; Jakarta rose 0.62%, or 23.81 points, to 3,881.40; Kuala Lumpur eased 0.56%, or 9.02 points, to 1,594.10; and Bangkok ended 0.32% higher, adding 3.66 points to 1,151.09.
from gulf times.