Cyprus bailout concerns shake Asian markets
- Published: 18/03/2013 at 08:08 PM
- Online news:
All eyes are on Cyprus as lawmakers get set vote on Tuesday on a controversial EU bailout which has stock markets across Asia, including Thailand's, looking on with increasing concern.
A man holds a placard reading 'I have a solution for the crisis' in front of the Cypriot parliament in Nicosia, Cyprus, on Monday. The Cyprus parliament is set to vote on Tuesday on ratification of a one-off tax on bank deposits. (EPA Photo)
Cyprus parliament speaker Yiannakis Omirou said on Monday a vote by lawmakers on the bailout that includes the levying of an unprecedented tax on private bank deposits has been postponed to Tuesday.
Mr Omirou told reporters that parliament would convene for the vote at 6pm (11pm Thailand time).
Cyprus's Finance Minister Michalis Sarris and Central Bank governor Panicos Demetriades said they were seeking a fresh formula that would exempt smalltime bank depositors from the harsh levy proposed in an EU bailout deal.
They separately told parliament that they were looking to see a tax-free threshold for savings up to 100,000 euros (3.8 million baht).
Mr Demetriades told MPs that under this plan, however, deposits of more than 100,000 euros would be forced to take a bigger hit.
Mr Sarris said that of the 67 billion euros in deposits, 30 billion represent savings held in accounts of less than 100,000.
"Together with the Central bank we are discussing the reconfiguration of rates which are close to zero for 100,000," said Mr Sarris.
Mr Demetriades said that if the law is passed by parliament, the European Central Bank will hold an emergency meeting aimed at releasing extra liquidity to Cyprus banks to help them withstand a possible rush on accounts.
As a condition for a desperately-needed 10-billion-euro bailout for Cyprus, fellow eurozone countries and international creditors Saturday imposed a levy on all deposits in the island's banks.
Deposits of more than 100,000 euros will be hit with a 9.9% charge, while under that threshold the levy drops to 6.75%.
The problem in Cyprus made Asian stock markets tumble.
The Stock Exchange of Thailand (SET) lost 0.41%, or 6.48 points, to 1,591.65.
SET executive vice president Pakorn Peetathawatchai warned investors especially individuals of volatility in the stock market due to a possible outflow of foreign funds to take benefits as the SET index had risen 21.76% since the beginning of this year.
Other markets in Southeast Asia and Asia also fell on Monday.
Singapore was down 0.90%, or 29.58 points, to 3,256.47, Kuala Lumpur slipped 0.39%, or 6.28 points, to 1,621.36 and Jakarta eased 0.34%, or 16.50 points, to 4,802.83.
Tokyo fell 2.71%, or 340.32 points, to end at 12,220.63 and Hong Kong lost 2%, or 449.75 points, to end at 22,083.36.
Global markets were jolted amid fears it could reignite the eurozone debt crisis and hit confidence in other troubled countries such as Spain and Italy.
"The feeling is that the euro crisis could be back and that you could see full on contagion, that's why you're seeing the market reaction today," said Shane Oliver, head of investment strategy and chief economist at Amp Capital in Sydney.
"But I suspect that we are going to hear reassurances from other countries that Cyprus is different and that this plan will not be put in place elsewhere," he told Dow Jones Newswires.
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Writer: Bangkok Post and AFP