Asian stocks rally on hopes of Greek deal

HOPES that the European Union might strike a deal with Greece after the country submitted eleventh-hour concessions helped Asian bourses rally yesterday.

Stocks surged on hopes that some resolution could be found to end the stand-off that has pushed the country to the verge of bankruptcy and possible ejection from the euro zone.

The Straits Times Index rose by 0.9 per cent to 3,330.15 in morning trade before closing at 3,315.13, up 14.17 points or 0.43 per cent.

Japan soared 1.3 per cent, Hong Kong jumped 1.2 per cent, the Hang Seng China Enterprises Index added 1.5 per cent, Taiwan gained 1.34 per cent and South Korea, 0.4 per cent. China's markets were closed for the Dragon Boat Festival holiday yesterday.

Analysts warned that a Greek exit from the euro zone could hamper Asia's efforts to cope with a slowing Chinese economy that is hitting especially hard in commodity-driven nations such as Malaysia and Indonesia.

However, Mr James Longsdon of credit ratings agency Fitch Ratings told a banking conference here last Friday that most of Greece's debt is owed to the official sector, which means there should be no great contagion among banks and funds if the country leaves the euro zone.

Greek government debt held by European banks was not large enough to trigger an "insolvency event" at the lenders, added Mr Longsdon, who is co-head of Europe, Middle East and Africa financial institutions at Fitch.

Greek Prime Minister Alexis Tsipras set out proposals on Sunday "for a mutually beneficial agreement, which will provide a permanent solution".

Without an agreement, it is likely Athens will run out of time to secure bailout funds, which could lead to a default on a €1.55 billion (S$2.35 billion) loan repayment due to the International Monetary Fund next Tuesday.

Mr Christoph Riniker, head of strategy research at Bank Julius Baer, noted yesterday: "To the relief of many, there were no capital controls (imposed) in Greece (yesterday). Adjusted proposals provided by Greece bringing an additional €900 million in measures seem to have bridged the gaps with creditors and are considered 'a good basis for discussion'.

"It remains to be seen how the European leaders will respond in terms of financial aid and for how long. The news is definitely positive and provides relief to markets."

Most emerging Asian currencies rose yesterday as hopes emerged over a Greek deal. The ringgit hit 3.7258 to the US dollar yesterday from 3.7481 last Friday. The Singdollar was mostly flat against the US dollar at 1.3348.

gleong@sph.com.sg

A version of this article appeared in the print edition of The Straits Times on June 23, 2015, with the headline 'Asian stocks rally on hopes of Greek deal'. Print Edition | Subscribe