By Sarah Turner, MarketWatch
SYDNEY (MarketWatch) -- Asia stocks reacted badly on Monday to
plans by Cyprus for an unprecedented levy on private bank deposits
as part of its European bailout program -- with U.S. stock-index
futures and the euro also sharply lower.
Japan's Nikkei Stock Average tumbled 2.1%, South Korea's Kospi
lost 0.6%, and Australia's S&P/ASX 200 index fell 1.4%.
In Chinese trading, Hong Kong's Hang Seng Index dropped 2.2%,
while the Shanghai Composite Index gave up a more modest 0.7%.
U.S. index futures also took a hit, as the Dow Jones Industrial
Average (DJI) contract traded 133 points, or 0.9%, Nasdaq (RIXF)
futures fell 33 points, or 1.2%, while those for the S&P 500
(SPX) lost 19.30 points, or 1.2%.
In the currency markets, the euro (EURUSD) fell sharply to
$1.2908 in Asian trading hours Monday, down from $1.3076 in late
North American trading Friday.
The losses for Asian stocks and other securities came after
Cyprus announced plans for a one-off levy on bank deposits in
exchange for equity in the banks. The measure was part of a deal
that would have international creditors provide 10 billion euros
($12.9 billion) to shore up the island nation's finances.
The move would mark the first time in the euro-zone debt crisis
that private citizens' bank deposits would be tapped, and Morgan
Stanley said the introduction of the levy "seems to have broken
another taboo."
The strategists went on to question whether "senior bank debt is
the next taboo to be broken, given the linkage with deposits."
Morgan Stanley recommended selling high-beta banks and said
that, broadly, "investors should expect material market weakness in
the near term." ((Read more analyst reaction to the Cyprus deposit
levy:
http://blogs.marketwatch.com/thetell/2013/03/17/cyprus-deposit-levy-shakes-up-markets/.))
Asia movers
In Hong Kong, the Hang Seng Index's top-weighted component --
London-based HSBC Holdings PLC (HBC)(HBC)-- fell 2.6%, with the
Financial Times also reporting that the bank is planning "thousands
more job cuts."
Other Hong Kong-listed financial shares also showed weakness,
with Agricultural Bank of China Ltd. (ACGBF) down 2.9%, China
Merchants Bank Co. (600036.SH) off 2.6% and broker Haitong
Securities Co. losing 3.1%.
The volatile property sector also fell n Hong Kong, with New
World Development Co. (NDVLF) losing 4.1%, and China Overseas Land
& Investment Ltd. (0688.HK) down 2.8% ahead of its earnings
report due later in the day.
Property shares were also reacting to fresh data, with TD
Securities strategist Annette Beacher saying that "while all eyes
are on the fallout of the proposed Cyprus bailout, the 70 city
property prices for China were released for February, and it was a
very strong report."
"An assortment of property price and lending controls has been
announced in recent weeks, and today's strong report confirms why
there has been some urgency in cooling this sector," she said.
With the Cyprus news weighing on global markets, the Japanese
yen (USDJPY) regained some safe-haven interest, sending the U.S.
dollar back below the Yen95 mark.
Amid a rising yen and worries of another flare-up in the
European debt crisis, Sony Corp. (SNE) fell 4.9%, Tokyo Electron
Ltd. (TOELY) also dropped 4.9%, Toyota Motor Corp. (TM) lost 2.7%,
and Mitsubishi Motors Corp. (MMTOY) retreated 3.7%.
However, Panasonic Corp. (PC) managed to rise 2.2% after a
Nikkei news report said the company was considering closing its
plasma-television operations.
Gold futures moved up $3.50 to $1,596.10 an ounce, but copper
plunged 9 cents, or 2.4%, to $3.44 a pound, helping to make
Australian mining stocks among the worst performers in Sydney on
Monday.
Among the majors, Rio Tinto Ltd (RIO) dropped 2.1%, while BHP
Billition Ltd. (BHP) fell 1.9%.
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