TOKYO – Asian shares mostly fell Monday after Greece's voters vehemently rejected conditions set by its international creditors, deepening doubts over their future in the 19-nation eurozone. But China's benchmark rebounded from heavy losses last week.
Greece's debt problem has long overshadowed the market and with a European summit expected Tuesday, the implications of Sunday's "no" vote remain unclear. So the initial response to Sunday's Greek referendum was negative but not panicked.
Japan's Nikkei 225 stock index was down 1.6 percent in afternoon trading at 20,215.16. South Korea's Kospi also fell 1.6 percent to 2,070.89. Hong Kong's Hang Seng index lost 1.1 percent to 25,789.98.
Mainland Chinese shares, which are somewhat isolated from world markets thanks to capital controls limiting the scope of foreign investment, recovered from their recent swoon as authorities and the securities industry acted over the weekend to staunch recent sell-offs.
The Shanghai Composite index surged nearly 6 percent after the market opened, but ceded most of the ground it had regained, trading 2.2 percent higher at 3,766.37 by midday.
The central bank pledged support for market investments as 28 companies agreed to postpone planned initial public offerings. Major brokerages pledged more than $19 billion for a fund to stabilize the free-falling markets.
The Chinese securities companies say they will continue to invest in the market as long the Shanghai Composite, China's equivalent of the Standard & Poor's 500 index, remains below 4,500. It closed at 3,686 on Friday.
Greek referendum results Sunday showed 61 percent of voters opted to reject demands for added austerity measures in exchange for further bailout funding, while 39 percent said "yes."
Economists said the markets were not expecting such an emphatic "no" vote and that could send stocks downward on Monday and propel investors toward so-called "safe havens" such as U.S. Treasuries or other government bonds that are viewed as largely protected from market turbulence.
"The result was clearly a more decisive 'no' than the polls had suggested," said Pavel Molchanov, equity research analyst at Raymond James. "This couldn't be more bearish for equities and commodities alike."
"The 'Greferendum' has turned out to be a 'Grief-erendum' at many levels," analysts at Japan's Mizuho Bank said in a commentary.
The scope for compromise in future negotiations on a financial rescue package for Greece remains unclear.
A Greek exit from the eurozone would shake markets, but the scale of its economic impact overall would be limited by the relatively small size of its $242 billion economy — less than 2 percent of the 19-nation eurozone — and its population of 11 million.
The European economy and European banks are in much stronger shape than they were when the debt crisis flared in 2010, said Paul Christopher, global market strategist for Wells Fargo in St. Louis, Missouri.
"We think the market reaction is likely to be sharp at first but then reverse higher in the coming weeks, as long as Eurozone policymakers respond in a proactive way," he said.
Elsewhere in the Asia-Pacific, Australia's ASX S&P 200 fell 1.2 percent to 5,473.30 and New Zealand's benchmark slipped 1 percent to 5,785.20. Shares were lower in Taiwan and Southeast Asia.
Wall Street looked likely to have a rough start after the Independence Day weekend, with Dow futures down 1.1 percent and S&P futures 1.2 percent lower. The Dow fell 0.2 percent on Thursday to 17,730.11 while the Standard & Poors index was little changed at 2,076.78.
The win of the "no" vote Greece increases the risks of the country falling out of the 19-country euro currency union if it must issue its own currency to alleviate a cash crunch.
"It's going to be an ugly day for the markets," predicted Kathy Lien, managing director of FX Strategy for BK Asset Management. "This means more weakness for the euro and major demand for safe haven currencies."
In Asia, the euro was trading early Monday at $1.1040, down from its Friday close of $1.1114. The dollar was little changed, slipping to 122.54 yen from 122.88 yen on Friday.
Oil prices fell, with benchmark U.S. crude tumbling $1.90 to $55.03 a barrel in electronic trading on the New York Mercantile Exchange. The contract fell 3 cents to close at $56.93 a barrel on Thursday. Brent crude, a benchmark for international oils used by many U.S. refineries, fell 51 cents to $59.81 a barrel in London.