Asia stocks sharply lower on Cyprus bailout fears; Nikkei ends down 2.7%

Investing.com - Asian stock markets were deeply in the red during late Asian trade on Monday, with shares in Japan plunging nearly 3% amid uncertainty over a bailout deal for Cyprus.

During late Asian trade, Hong Kong's Hang Seng Index tumbled 2%, Australia’s ASX/200 Index ended 2.1% lower, while Japan’s Nikkei 225 Index closed down 2.7%.

On Saturday, the European Union and International Monetary Fund reached an agreement on a EUR10 billion bailout for Cyprus. In return for the bailout international creditors demanded that all bank customers must pay a one-time tax on deposits.

The agreement marked the first time since the onset of the debt crisis that depositors have been forced to take a haircut in return for financial aid and triggered a run on cash machines in Cyprus over the weekend.

The parliament in Cyprus was to vote on whether to approve the tax proposal later in the day. If the vote was defeated media outlets in Cyprus said banks could remain closed on Tuesday, following a public holiday on Monday, to avoid mass withdrawals.

The news prompted investors to shun riskier assets, such as stocks and industrial commodities, and flock to traditional safe haven assets like the yen and U.S. Treasuries.

In Tokyo, the Nikkei logged its biggest daily loss in ten months as the safe-haven yen jumped to a one-week high against the U.S. dollar, weighing on exporters.

A stronger yen reduces the value of overseas income at Japanese companies when repatriated, dampening the outlook for export earnings.
 
Automakers Mazda and Honda lost 5% and 3.4% respectively, while Sony and Canon tumbled 6.8% and 2.2%.

Japanese megabanks were also lower, with stocks of the nation’s largest lender Mitsubishi UFJ Financial Group dropping 3.1%, while Sumitomo Mitsui Financial Group and Mizuho Financial Group declined 2.7% and 2.4% respectively.

Meanwhile, in Hong Kong, the Hang Seng dropped sharply, as market players remained concerned over the economic outlook for China, the world’s second largest economy.

The China banking sector were among the biggest drags on the index, with China Construction Bank shares dropping 2.4%, Industrial and Commercial Bank of China falling 2.8% and Bank of China declining 2%.

Index heavyweight HSBC Holdings also contributed to losses, down 2.5%. Shares of HSBC command a 15% weighting on the Hong Kong benchmark, making it the single largest constituent on the index.

Elsewhere, in Australia, the benchmark ASX/200 Index was dragged down by losses in global miners, which tracked metal prices lower.

Rio Tinto and BHP Billiton dropped 1.9% and 2.1% respectively, while iron ore producer Fortescue Metals Group tumbled 4%.

Looking ahead, European stock market futures pointed to a lower open, as an agreement on a bailout deal for Cyprus triggered fresh fears over disruption to financial markets in the euro zone.

The EURO STOXX 50 futures pointed to a loss of 2.5% at the open, France’s CAC 40 futures fell 1.8%, London’s FTSE 100 futures slumped 1.7%, while Germany's DAX futures pointed to a decline of 1.6% at the open.

The euro zone was to official data on the trade balance later in the trading day.