Asia Enjoys Relief Rally Ahead of Cyprus Vote

By: Nyshka Chandran

Asian markets licked their wounds on Tuesday as risk assets recovered ground after the previous day's sell-off on hopes that Cyprus's upcoming vote on the bank deposit levy will pass through parliament and secure the island's financial rescue.

The Nikkei 225 regained 1.8 percent and Seoul's Kospi inched closer to the 2,000-mark. In Greater China, Shanghai rebounded after touching an all-time low for 2013 while the Hang Seng Index recouped losses from Monday's three-month low. Australian shares however, dipped below the 5,000-mark to close at a near one-month low.

Richard Martin, managing director at IMA Asia told CNBC's "Capital Connection"that developments in Cyprus will increase capital flows into Asia as the region is one of the few strong growth plays for investors. "The sum total may be that this (Cyprus) does push more money in Asia's direction," he said.

Cyprus's shock bank levy announcement did not have as deep of an impact on global markets as initially feared. The S&P 500 index only pulled back half of a percent overnight and the uptick in Spanish and Italian yields was relatively contained, which is helping to pave the way for an overall rebound across risk assets in Asia.

	Name	Price		Change	%Change
NIKKEI	Nikkei 225 Index	12480.18	 	259.55	2.12%
HSI	Hang Seng Index	22091.70	 	8.34	0.04%
ASX 200	S&P/ASX 200	4987.40	 	-28.00	-0.56%
SHANGHAI	Shanghai Composite Index	2245.75	 	5.73	0.26%
KOSPI	KOSPI Index	1979.99	 	11.81	0.60%
CNBC 100	CNBC 100 ASIA IDX	6972.57	 	22.44	0.32%

Global equities notched up spectacular gains earlier this month, with the Dowlogging all-time highs, German and French stock markets hitting a 52-week peak, and Japanese shares at a four-and-a-half-year record. Many analysts had expected a looming correction, and the Cyprus bailout deal may be the catalyst for a risk-off phase.

"In Greece, the issue was never about the nation specifically but about the precedent that Greece could set as the first country feared to exit the euro zone. That's the danger for Cyprus, it's the danger of precedent," said Ilya Spivak of online forex trading broker, FXCM on CNBC Asia's "Squawk Box."

Nikkei Crosses 12,400

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Yen weakness in Asian trade supported the Nikkei's recovery. The currency was trading around the 95.5 levels, in sight of the recent three-and-a-half-year low of around 96.7 to the dollar.

Electrical equipment exporters are usually the first to react to currency movements as any swing in the yen's value affects their repatriation earnings. Taiyo Yuden soared 9 percent while Sony added 6 percent as the yen resumed its decline.

Bank of Japan (BOJ) chief Masaaki Shirakawa is set to end his five-year term on Tuesday as he passes over the helm to his successor Haruhiko Kuroda, who is expected to announce radical stimulus measures at the BOJ's policy meeting next month.

If uncertainties over Europe persist, investors may flock back to the safe-haven yen, which would cap broader stock market gains. A weak yen has lifted the Nikkei nearly 30 percent since the start of 2013.

Korea Inches Up

Seoul shares crept up to track an Asia-wide recovery as investors took advantage of the previous day's sell-off to bargain hunt. Tech shares provided support with market heavyweight Samsung Electronics rallying 2.6 percent while LG Electronics jumped 1.4 percent.

The Korean won moved off a previous six-month low against the U.S dollar to strengthen to 1,110. The currency touched 1,119.05 per dollar on Monday, its weakest levels since September.

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Greater China Rebounds

Hong Kong shares recovered modestly from the previous day's three-month low as property stocks erased the previous day's sell-off. BothCheung Kong Holdingsand SHK Properties added over 1 percent.

The Shanghai Compositebriefly hit an all-time low for 2013 at 2,232 points but financials helped lift the index higher. Everbright Securities rallied nearly 2 percent while New China Life Insurance extended gains from Monday to jump 1.2 percent.

Fears of excess liquidity continued to plague investors after reports that China's central bank would drain roughly $6.2 billion from money markets on Tuesday. The central bank has used monetary policy to stabilize liquidity in recent weeks but investors are concerned whether these draining operations signal a real shift to tighter policy.

(Read More: China Showing Symptoms of Financial Crisis: Report)

The index hit a two-week low on Monday and has been on a downwards spiral ever since peaking at 2,444 points in February, a 10-month high.

Ray Barros, CEO at Ray Barros Trading Group told CNBC's "Cash Flow" that he expects more price action down. "The upward move (to the 2,444 level) took approximately two months so I'd expect the downward move would take about the same," he said on

A last minute pull back in Sydney shares led the S&P ASX 200 to close at its lowest levels in nearly a month after the index traded in positive territory all session.

Gold miners led the index higher after prices of the yellow metal hit its strongest levels since February. Evolution Mining led losses by 5 percent.

Shares of Australia's largest internet services provider, TPG Telecommunications,rallied 4.8 percent after posting a strong half-year profit rise of 41 percent to $78.3 million

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