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By Denny Thomas and Rebecca Howard
HONG KONG/WELLINGTON, June 24 (Reuters) - Asian currency,bond and equity traders kicked off an early day of choppytrading as the growing likelihood of a British vote to leave theEuropean Union sent shivers across trading floors and kept manyinvestors glued to their television screens.
Trading desks at most foreign banks from Hong Kong toSingapore started on Friday nearly two hours before their normalstart to take in early orders and address investor concerns. Butthe market meltdown and volatility pushed many traders to thesidelines as they waited for the final vote tally, before takingfresh positions.
"I am getting slightly seasick from the fluctuations betweenin and out," Michael Blythe, chief economist at CommonwealthBank of Australia. "I haven't heard this much noisefrom the dealing room in a very long time," he added.
Britain's bitterly contested referendum on whether to quitthe EU began too close to call early on Friday, with partialresults showing a deeply divided nation, but the pound washammered as the numbers slowly tipped in favour of a vote toleave.
The threat of Britain leaving the European Union has hadmarkets across the asset classes on edge.
The British pound fell about 10 percent, while shares inBritish bank HSBC plc tumbled 8 percent, while the FTSEfutures pointed to a 7.5 percent slump at the UK stockmarket open.
"Volatility has been the theme of the year, and people aregetting used to it," said Danny Bao, chief investment officer atHJY Capital Advisors (HK) Ltd. "The big unknown is thecomplication that a Yes vote (to leave) will create for EU. Weare sitting tight for now," he added.
Asian markets were first to open and react as the resultsvote count tricked in. With results declared from 282 of 382voting districts plus parts of Northern Ireland, Leave was aheadby 51.6 percent to 48.4 percent..
"Liquidity generally is very light. Even before coming intothe voting day, liquidity was generally light. The problem isthe market was generally pricing in a 'remain', so obviouslyyou're seeing the pound and currency markets generallyrecovering back to any risk-off level," one Hong Kong-based fundmanager said.
"I don't think it's Armageddon day, but definitely it's ashort-term surprise if they voted for a leave," the fund managersaid.
Tight liquidity has widened the bid and offer gaps in theAsian credit markets, with very small lots going through in lowvolume trade. In the CDS market the iTraxx benchmark is trading at 142/145 bps, wider by about 8bps, andtraders said it was one of the most volatile days of the year.
One bond taking a big hit was the HSBC 6.875% perpetual, down 4 points in price at 97.5/99. But somehigh-yield bonds are outperforming as it has caught bids fromrisk seekers.
"We are seeing some support in high yield from investorsrotating out of stocks," said a Singapore based trader. (Reporting by Denny Thomas Howard Rebecca, Elzio Barreto, UmeshDesai; Editing by Will Waterman)
