Stock markets in Asia fell Monday, as investors feared the “no” vote in Italy’s referendum could hurt the country’s banking system and spark global contagion.

Major markets in Asia saw sharp drops at the start of trade Monday, but these losses moderated over the day.

Japan’s Nikkei Stock Average NIK, -0.73% was down 0.8%, while Australia’s S&P/ASX XJO, -1.15% was also 0.8% lower. Korea’s Kospi 180721, -1.92% fell 0.4%.

Hong Kong’s Hang Seng Index HSI, -1.81% closed down 0.3% and the Shanghai SHCOMP, -1.46% ended off 1.2%, even after the much-anticipated trading link connecting the Shenzhen and Hong Kong stock exchanges launched Monday.

“Markets reacted with a fairly calm head, with a lot of water flown under the bridge already” this time around, said Chris Weston, chief market strategist at IG Markets. “There is no panic.”

Most of the declines in early Asian trade came after Italian Prime Minister Matteo Renzi offered to resign after conceding defeat in the vote on constitutional reform, sending investors toward safe-haven assets.

The U.S. dollar DXY, +0.02% was broadly stronger against Asian currencies, gaining 0.5% against the Korean won and 0.4% against the Taiwanese dollar. It was up 0.3% against the New Zealand dollar and gained 0.2% over the Australian dollar. The U.S. dollar was down against the yen, however, owing to investor appetite for the safe-haven Japanese currency.

The need for safety also sent investors towards Asian-Pacific government bonds. The yield on 10-year Korean government bonds fell 0.069 percentage points Monday to 2.190%. Bond yields fall as prices rise.

“ “It is well known that a number of Italian banks have sizable bad loans on their books, Monte dei Paschi di Siena being the most well-known case. There are huge question marks over whether the government can prop up banks if they fail.” ” — Alex Furber, CMC Markets.

The “no” vote could prop up the antiestablishment 5 Star Movement, which has called for a referendum on Italy’s euro membership. It has also advocated breaking away from European Union budget strictures, and moving toward printing a parallel currency.

Read:What to know now that Italy has voted ‘no’, with Renzi set to step down

Rising political uncertainty in the European Union’s fourth-largest economy could increase pressure on the country’s banks, investors said. Banking stocks across Asia declined on worries of any spillover impact.

Japan’s Topix subindex tracking banks fell 1.8%, with Mitsubishi UFJ Financial Group 8306, -0.77% off 2.4%, T&D Holdings down 2.8% and Sumitomo Mitsui Financial 8316, -0.09% shedding 1.8%.

In Australia, the Australia & New Zealand Banking Group ANZ, -0.17% fell 1.1% and Macquarie Group MQG, -1.55% dropped 1.9%.

“It is well known that a number of Italian banks have sizable bad loans on their books, Monte dei Paschi di Siena being the most well-known case,” said Alex Furber, a sales trader at CMC Markets. “There are huge question marks over whether the government can prop up banks if they fail.”

However, Australia’s DUET Group AU:DUE gained sharply after Hong Kong’s Cheung Kong Infrastructure bid about 7.3 billion Australian dollars (US$5.4 billion) for the Australian pipeline operator and power distributor.

Taiwan’s benchmark Taiex opened higher, bucking the region’s declines, but the gain was short-lived. The index was last down 0.3%.

U.S. President-elect Donald Trump over the weekend criticized China on Twitter, and took a call from Taiwan President Tsai Ing-wen on Friday, risking Beijing’s ire.

“If Donald Trump is communicating with Taiwan from a state level, then it’s seen by the Chinese government as a separatist move. It is very provoking,” said Hao Hong, chief strategist and co-head of research at Bocom International.

In Shanghai, investors bought defense stocks, driven by speculation that Trump’s call with the Taiwanese leader would escalate military tension between Beijing and Taiwan.

Military defense-related shares, such as AVIC Electromechanical Systems 002013, +0.26% and China Spacesat 600118, -2.59% gained 3% and 0.5%, respectively.

Elsewhere in the region, New Zealand Prime Minister John Key’s resignation led to a 0.8% drop in the local equities benchmark index.