Tokyo: Asian shares steadied on Thursday from the previous day's sell-off, but investors found no reason to bet on risk amid deepening turmoil in Greece and fears of contagion to other stressed euro zone economies.
MSCI's broadest index of Asia-Pacific shares outside Japan inched up 0.1 percent, after sliding more than 3 percent for its biggest one-day drop in six months on Wednesday.
The index hit a new 4-month low on Wednesday, and has shed 9.6 per cent since May 2.
Japan's Nikkei stock average .N225 opened down 0.1 percent.
Risk assets across the board took a further beating on Wednesday on news that some Greek banks face emergency funding needs.
The European Central Bank said it has stopped providing liquidity to some Greek banks that have not been successfully recapitalised, highlighting the weak state of the banking sector in the indebted country.
Greece on Wednesday put a senior judge in charge of an emergency government to lead the nation to its second election in just over a month on June 17, which will likely determine whether it remains in the common currency area.
The head of the World Bank warned on Wednesday that a decision by Greece to leave Europe's common currency zone would raise big questions about the impact on Spain, Italy and other euro zone countries with big debt loads that are undergoing structural reforms.
Australia's ANZ said in a research note that an exit by Greece could benefit its own economy but would not address the fundamental flaws of the euro zone.
"Unless these are remedied, pressure will mount on others to leave. In our opinion, the costs associated with an exit are high for all parties and are likely too high in the current fragile environment."
ANZ said its baseline scenario was a 70 percent probability of the euro zone staying intact and a 50 percent probability of a policy shift to growth over austerity, giving some support to risk assets and the euro. It put the chance of a disorderly exit at 4 percent and the likelihood of a total break up of the euro zone at just 1 percent.
Stress levels remained high in Asian credit markets, with the spread on the iTraxx Asia ex-Japan investment-grade index hovering near its widest since mid-January.
The euro was steady around $1.2730, off a four-month low of $1.26811 reached on Wednesday. The Australian dollar, typically linked to risk appetite, also steadied at $0.9930, having hit a five-month low of $0.9870 on Wednesday.
The dollar index .DXY measured against key currencies remained firm, as investors favoured safe havens.
Uncertainty about Greece's future in the euro nudged some indicators of money market stress higher on Wednesday, but they were still well below last year's levels given a banking system awash with central bank cash.
Three month euro/dollar cross currency basis swaps, which shows funding stress when investors compete for dollars, widened to minus 54 basis points from around minus 46 bps in early May. It marked minus 167.5 in November when investors feared another credit crunch.
Oil regained ground, with U.S. crude futures up 0.2 percent at $93 a barrel, after settling down more than $1 on Wednesday. Brent futures fell 0.2 percent to $109.54 a barrel on Thursday.
Spot gold also recovered from a 4-1/2 month low of $1,527 an ounce reached the day before.