SHOCKWAVES from the deepening Greek debt crisis sent stock markets tumbling across Asia yesterday, with a crucial debt repayment deadline looming today.
Fears are growing that Greece could face a rapid exit from the euro zone if, as expected, it defaults on the €1.6 billion (S$2.4 billion) payment to the International Monetary Fund (IMF) by the end of today.
With Greek banks shut till next Monday and tough limits on ATM withdrawals, Athens has called a snap referendum for July 5 asking voters to say "yes" or "no" to austerity conditions proposed by creditors for bailout aid.
The aid would be yet another loan to pay off a tiny amount of Greece's mountain of debt.
Greek Prime Minister Alexis Tsipras, who walked away from crisis talks over the weekend after springing the surprise referendum, believes the bailout offer from European governments and the IMF is too harsh, requiring still deeper pension cuts and tax increases in a depressed economy.
The euro sank to a low of 1.0962 to the US dollar yesterday and, closer to home, the Malaysian ringgit plunged to 3.7847 against the US dollar, its weakest level in almost a decade. The Singdollar weakened a little to 1.3489 from 1.3463 last Friday.
Market turmoil across the globe intensified when a weekend move by China's central bank to cut interest rates last Saturday failed to give a sustained lift to Chinese stocks, which have been correcting in the past two weeks after their longest rally.
Beijing cut its benchmark lending rate by 25 basis points to 4.85 per cent and its one-year deposit rate by the same - to 2 per cent. Yesterday, Shanghai sank 3.34 per cent, Shenzhen plunged 6.05 per cent, Hong Kong fell 2.61 per cent, and Japan slipped 2.88 per cent. Singapore's Straits Times Index lost 1.23 per cent.
Despite the market jitters, some analysts believe the fallout from Greece will be limited for now. "We do not expect significant market distress in Asia at this point, unless the Greek drama turns into a global financial market contagion," UOB Global Economics & Markets Research said.
"We still think that the European authorities are both prepared and equipped to act to preserve the integrity of the euro in the face of market turbulence from Greece uncertainties," it said.
Athens closed the nation's banks yesterday after the European Central Bank (ECB) froze funds that have kept them afloat in a six-month run on deposits.
Banks will be kept shut until after the referendum, and daily withdrawals from cash machines have been limited to €60. Athens Stock Exchange did not open yesterday.
Mr Tasos Kousloglou, a Greek national and Singapore permanent resident who last week returned from visiting his family in Greece, told The Straits Times yesterday: "Most Greek people have lost about 40 per cent of their income in the last five years as a result of the austerity measures imposed by the troika. Unemployment has exceeded 30 per cent."
The troika refers to the IMF, ECB and European Commission.
Bank of Singapore chief economist Richard Jerram said the risk of contagion is limited as most of Greece's debt is to institutions such as the IMF, EU and ECB. Private-sector debt is limited.
The Monetary Authority of Singapore issued a statement saying that the financial system is continuing to operate normally here.