Asian markets fall, Greek bailout delay dampens mood

Friday, 17 February 2012 00:01 - - {{hitsCtrl.values.hits}}

TOKYO: Asian shares and the euro fell on Thursday, sharply reversing the previous day’s rally as optimism was dashed by another delay in cementing a crucial bailout for stricken Greece, underscoring how far away Europe is from resolving its debt crisis.

After a three-hour teleconference between euro zone finance ministers, questions remain over the euro zone’s bailout of Greece, putting off any decision over the matter until Monday at the earliest, a German government official said on Wednesday.

MSCI’s broadest index of Asia Pacific shares outside Japan fell 0.7 per cent, after climbing 1.4 per cent on Wednesday when riskier assets including emerging Asian currencies rose broadly on hopes Athens would finally be granted the rescue fund.

Japan’s Nikkei opened down 0.3 per cent after rallying more than 2 per cent to six-month highs and outperforming its Asian peers on Wednesday.

“The news of a Greek delay may prompt profit-taking for overheated markets, but fundamentally speaking the talks are advancing towards a bailout,” said Hiroichi Nishi, equity general manager at SMBC Nikko Securities.Nishi.

“Global markets are flooded with liquidity amid central banks’ easing policies so even if shares fall today, there are plenty of buyers at the dip,” he said.

The euro eased 0.1 per cent to $1.3050, slipping from Wednesday’s high of $1.3191.

Reflecting deep-rooted mistrust over Greece’s commitment to deliver reforms in exchange for the rescue, several EU sources said on Wednesday that euro zone finance officials are examining ways of delaying parts or even all of the second bailout programme for Athens while still avoiding a disorderly default.

Delays could possibly last until after the country holds elections expected in April, they said. A debt swap agreement between Greece and private sector holders of Greek bonds, however, could go ahead, possibly allowing Greece to avoid missing a 14.5 billion euro bond redemption payment on March 20 and preventing default.

Greece said it has met all the conditions set by the European Union and the International Monetary Fund for a 130-billion-euro rescue fund needed to meet the vital debt repayment date in March.

Asian credit markets weakened, with the spreads on the iTraxx Asia ex-Japan investment grade index widening by about five basis points early on Thursday.