Markets among the most vulnerable to any contagion from the Greek crisis are in peripheral euro zone countries like Italy, Spain and Portugal but it is stocks, not bonds or the euro, that are likely to suffer most.

A flood of investment over recent months has fuelled a sharp rally as investors bet that European Central Bank stimulus would lower bond yields, cheapen the euro and give the continent’s economy — and corporate profitability — a shot in the arm.

But that means there’s more room for air to come out. Stocks have already fallen more than bonds and the euro since the dramatic escalation in the Greek crisis at the end of June, with banking stocks in particular underperforming.

Bonds have the support of the ECB’s 1 trillion euro quantitative easing programme while the euro, never the best gauge of euro zone crisis sentiment, has its downside limited by large-scale market bets already in place that it will weaken.

“If the ECB were buying equity, I would be much more sanguine on equities,” said Ramin Nakisa, global multi-asset strategist at UBS. “But of course, that’s not the case.”

Since Friday June 26, just before Athens announced it would hold a referendum on the terms of the international bailout then being offered, the euro has lost barely a cent and a half.

Benchmark Spanish and Italian 10-year government bond yields have risen no more than 10 basis points. Both these have been relatively small moves.

The bond market calm is particularly notable. Barclays, JP Morgan and Goldman Sachs expected the premium investors demand for buying Spanish and Italian bonds over German bonds to rise to 200 basis points this week after the referendum. On Wednesday, it was around 155 basis points.

FIRST CUT IS THE DEEPEST

But it has been a different picture in euro zone stocks, which had risen 25 percent since last October by June 26.

European equity funds had attracted year-to-date net inflows of $67 billion, almost as much as Japanese and all other non-U.S. international developed market stock funds combined, according to EPFR and Bank of America Merrill Lynch.

But since June 26, the Eurostoxx 50 index of leading shares has fallen nearly 10 percent.

Italian, Spanish and Portuguese banking share indices have fallen even further, shedding around 15 percent of their value .

Total European bank exposure to Greek debt currently stands at around 30 billion euros. That’s negligible relative to the size of the bloc’s financial system and economy, and is well down from more than 250 billion euros in 2009 and 50 billion euros before the private sector debt writedown in 2012.

“It’s only 30 billion, but it’s still 30 billion more than any other sector,” said Yves Kuhn, Group Chief Investment Officer at Banque Internationale a Luxembourg, an investment firm with around 30 billion euros of assets under management.

Kuhn also points to the “crash” in Chinese equities, which have lost a third of their value in just three weeks, and says there may be a simpler explanation for stocks’ underperformance.

“It’s classic ‘risk-on, risk-off’,” he said.

“Rightly or wrongly, equities are still seen as the riskiest asset class. That’s the first place where people cut back.”

He said BIL had reduced its equity exposure over the last three months, building up cash holdings to around 15-20 percent. But assuming a Greek exit would not be another “Lehman moment” and would not steer the euro zone economy off its recovery path, he is now looking to buy stocks rather than sell.