Greek downgrade sends shockwaves through Asia

JAPAN: Stocks plunged and the euro hovered at one-year lows against the dollar in Asia Wednesday after the downgrade of Greek and Portuguese debt by a major ratings agency sent shockwaves through markets.

Asian bourses followed Europe and Wall Street in a sell-off as Greece scrambled to secure desperately-needed emergency loans to avoid a debt default after ratings agency Standard & Poor’s condemned it to “junk” status.

“It was always just going to be a matter of time before Greece got further downgrades,” Koon Goh, senior economist at ANZ bank in Wellington told Dow Jones Newswires. “But the aggressive move by S&P took the market by surprise”.

While the euro regained some ground in Asia after being hammered overnight, it remained stricken by growing fears of eurozone contagion after Portugal also saw its rating slashed by the agency, although it remained at investment grade.

“The spotlight will also start to turn more on other highly-indebted countries in the eurozone, and investors will increasingly demand higher risk premiums for government debt,” Goh said.

Tokyo dived 2.47 percent by noon, with exporters hit by the yen’s relative strength against the ailing euro. Hong Kong slumped 1.62 percent and Seoul tumbled 1.55 percent.

Sydney lost 1.64 percent, recovering from an earlier plunge, while Taipei shed 2.10 percent. Singapore was down 1.23 percent.

Overnight in New York, the euro fell below 1.32 dollars for the first time since April 28 last year, after Greece’s rating downgrade reflected the increasingly high risk of it defaulting as its borrowing costs soared.

The euro edged higher to 1.3179 dollars in Tokyo morning trade from 1.3172 dollars in New York late Tuesday, after earlier plunging to 1.3168 dollars. Tokyo, Wednesday, AFP