$20b hit for market as Greeks defy bailout odds
MORE than $20 billion has been wiped off the Australian stock market after Greece shocked investors with an overwhelming rejection of austerity measures that could see the country headed for a messy exit from the euro zone.
Greece’s ruling Syriza party secured a stunning victory at a referendum on Sunday, where more than 60 per cent followed Prime Minister Alexis Tsipras’s urging and voted against harsh bailout conditions.
The move came as a shock to markets – investment banks had put the chance of the “no” vote succeeding as low as 25 per cent last week.
Australia was one of the first markets to react to the news and both the S & P/ASX 200 and All Ordinaries finished the day about 1 per cent lower.
Meanwhile the Australian dollar slipped below US75¢ for the first time since mid2009.
The Greek Government hopes to use the poll results to demand better terms from its major creditors, the International Monetary Fund and the European Union.
But the vote could mark the beginning of the end for the country’s membership of the euro zone.
JP Morgan says the odds of the country leaving the euro zone are now about 66 per cent.
“This is a path that suggests to us that there is now a high likelihood of Greek exit from the euro, and possibly under chaotic circumstances,” it said in a research note.
That’s especially the case if Greece, which is already in arrears on its debt to the IMF, misses the July 20 deadline to repay ¤4.2 billion to the European Central Bank.
Every sector of the Australian market finished the day in negative territory, with the exception of gold miners, which tend to do well during times of uncertainty due to the metal’s reputation as a “safe haven” asset.
OptionsXpress market analyst Ben Le Brun said despite the slide, most investors were taking a wait-and-see approach.
“The trading volumes are very light and a lot of that is probably due to the fact that we are waiting to see how European and US markets react overnight,” he said.
“We are going to be trading headline to headline on this for the foreseeable future, unfortunately.”
In Asia, Hong Kong’s Hang Seng was down more than 4 per cent and Japan’s Nikkei dropped 2.4 per cent.
Even news China would move to prop up its ailing stock market, which has lost around 26 per cent in a fortnight, weren’t enough to stem the bleeding.
China has suspended new listings and enlisted the help of its top stock brokers, which have agreed to collectively buy at least 120 billion yuan ($A25.56 billion) of shares.
The Shanghai Composite Index initially bounced up to 8 per cent higher but spent the day retreating from those levels.