Most Asian stocks drooped on Tuesday as Chinese equity markets went into a fresh tailspin, fraying investor nerves already strained by uncertainty hanging over the future of Greece and the European currency union.
Chinese shares fell more than 5 percent at one point despite unprecedented steps last weekend to stabilise the plummeting market, with the CSI 300 index falling to near four-month lows.
MSCI’s broadest index of Asia-Pacific shares outside Japan fell 0.6 percent, led by Hong Kong and South Korea, though markets in developed countries fared better.
Japan’s Nikkei rose 1.4 percent after a sharp fall on Monday while European shares were seen mostly flat as investors await a euro zone summit on Greece later in the day.
Spreadbetters called a flat open for Germany’s DAX and France’s CAC 40 and 0.2 percent gains for Britain’s FTSE.
European and U.S. stocks fell on Monday after Greeks voted overwhelmingly to reject more austerity.
For now, investors are holding out hope that Greece will manage to strike a deal with its creditors and prevent an exit from the euro zone.
“Greece is in difficult condition. Although there is volatility in the short term and discussion will be rough, I still expect a solution to be found to avoid a very nasty situation in the end,” said Alain Bokobza, Paris-based head of global asset allocation at Societe Generale.
The euro rebounded from Monday’s one-week low to fetch $1.1044 while the yen, initially bought as a safe-haven play, stepped back to 122.71 to the dollar from Monday’s high of 121.70.
In a sign that Athens is keen to seek a new deal, Greece’s combative Finance Minister Yanis Varoufakis resigned on Monday, apparently under pressure from other euro zone finance ministers who did not want him as a negotiating partner.
Greek Prime Minister Alexis Tsipras told German Chancellor Angela Merkel on Monday that he would bring a proposal for a deal to Tuesday’s emergency euro zone summit, a Greek official said.
Still, it was unclear how much it would differ from other proposals that were rejected in the past, or if creditors especially Germany are willing to concede some debt relief to Athens.
Asian assets were also increasingly burdened by rising concerns over massive losses in Chinese stock markets over the last few weeks, which are raising fears of damage to the already slowing economy and questions over the government’s policy decisions.
“I don’t see any change in the downward trend,” said Qi Yifeng, analyst at consultancy CEBM in Shanghai. “It’s only a matter of whether the market will fall more slowly, or continue to go south in a free fall.”
Trading remained highly volatile even after weekend emergency measures from Beijing, under which brokerages and fund managers vowed to buy massive amounts of stocks, helped by China’s state-backed margin finance company, which in turn would be aided by a direct line of liquidity from the central bank.
“Prior to the selloff the Chinese market looked bubbly, kept rising even as the economy is slowing. It will take some time for the market to calm down,” said Shuji Shirota, head of macroeconomics strategy group at HSBC in Tokyo.
“Judging from Japanese experience it is not easy to support share prices just by price keeping operation,” he said, referring to Japanese attempts in the 1990s to shore up the stock market by using public funds to buy shares.
Fears of instability in the Chinese economy dented many types of assets that are thought to be leveraged to demand from China.
In the currency market, the Australian dollar fell to a six-year low of $0.7452 on Monday and last stood at $0.7480.
London copper fell to a fresh five-month low of $5,512 a tonne, falling as much as 1.4 percent.
Oil prices also steadied after having suffered its biggest selloff in five months on Monday.
On top of the Greek and China worries, oil prices were pressure by expectations that nuclear-compromise talks between Iran and global powers could ease sanctions against Teheran and open up oil exports to an already over-supplied market.
U.S. crude fell 7.7 percent on Monday, hitting a three-month low of $52.41 a barrel and last stood at $53.03, up 1.0 percent from late U.S. levels.
Brent shed 6.3 percent on Monday and last quoted at $57.07, up 1.3 percent on day.