World financial markets rose yesterday following Greece's decision to scrap a referendum on its debt bailout and the European Central Bank's surprise quarter-percentage-point cut in interest rates. Stocks were up across the board in all East Asian markets except Bangkok; Thailand is still wrestling with the damage from floods. Hong Kong and South Korea outperformed the rest of the region. The Hang Seng Index and the Kospi both climbed more than 3 per cent. The main Shanghai index finished up less than 1 per cent. The positive news from Europe was muted by continued concerns over slowing exports, extended credit tightening and a possible downturn in the property market as mainland developers started to cut prices. However, European and US stock markets opened lower yesterday. Overall, markets are still trading at a discount compared with same time last year because of the global climate of political and economic uncertainty. Diana Choyleva, director of independent research house Lombard Street Research, said the world economy was not likely to get any better soon. 'The crisis in Europe is likely to worsen in the next 12 months ... not only the euro zone is heading for a recession, but the US economy could also be heading for a hard landing in the first half of 2012,' she said. There is a risk that Greece, whose political parties are divided over the resolution of its debt problem and which faces the prospect of a snap general election, could exit the euro-zone, creating havoc in the global financial system. Choyleva said China, faced with weakened demand for exports from the US and Europe and high inflation at home, could experience real GDP growth 'well below double digits'. But she said the silver lining for China was that inflation would be brought under control, which in turn would ease the pressure for a further tightening of credit measures. Hong Kong would be more adversely affected by a downturn from the euro zone crisis than the rest of Asia, said John Tang, China strategist at UBS. He said the Hong Kong stock market could fall heavily because of an outflow of capital that would dry up liquidity. But Bill Belchere, chief global economist with Mirae Asset Securities, said a rebound in the markets could well extend into the first half of next year or beyond if there were a change in the capricious market sentiment. Constructive news about a soft landing for China and a stabilisation of euro-zone debt could do the trick, he said. A market rebound could be stronger than the economic data as uncertainty lifted, Belchere said, if the market perceived progress in resolving the political and economic challenges created an environment of greater certainty. A rebound could be further sustained by less negative or even positive data releases out of the US on employment.