Asia: Markets sink as banks bear brunt of SVB contagion fears
Asian markets sank on Tuesday (Mar 14), with banks bearing the brunt of the selling on fears of contagion in the sector after the collapse of two regional US lenders.
Stocks across the region closed lower as traders grew concerned about possible contagion after the collapse of US lender Silicon Valley Bank (SVB).
The Hang Seng Index sank 2.27 per cent, or 448.01 points, to 19,247.96.
The Shanghai Composite Index fell 0.72 per cent, or 23.38 points, to 3,245.31; while the Shenzhen Composite Index on China’s second exchange lost 0.98 per cent, or 20.49 points, to 2,075.93.
Among banks in the region, Mitsubishi UFJ Financial was off more than 8 per cent and Sumitomo Mitsui Financial Group was more than 7 per cent down in Japan, while Hong Kong-listed HSBC sank more than 5 per cent.
National Australia Bank was off more than 1 per cent and South Korea’s KB Financial Group fell more than 3 per cent.
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Bloomberg News reported that about YS$465 billion had been wiped off the market value of global financial stocks in three days.
“Measures by authorities have so far prevented a US bank run on deposits but have not been enough to avert a bank run by investors,” said National Australia Bank’s Rodrigo Catril.
“The risk of a financial crisis remains elevated, and investors have rushed to reduce their exposure to the sector.”
Stephen Innes of SPI Asset Management added that the selling came despite non-US banks having little exposure to the firms in trouble and with global financial systems flush with cash.
“US financial stress could lead banks of all stripes to retrench lending to the real economy and tighten broader financial conditions, amplifying risk to the broader markets,” he added.
“And a lower rates environment would likely hit worldwide banks’ profits.”
Investors were already on edge over the prospect the Fed would hike interest rates more than initially thought when it meets next week, as the economy remains in rude health and the jobs market tight.
They are now nervously awaiting the release of US consumer inflation figures this week, with a forecast-beating figure meaning a huge headache for the Fed, in light of the SVB crisis.
“A policy mistake is hands down the biggest risk in the market,” said Mary Manning of Alphinity Investment Management. “Controlling inflation but also addressing the fact there is some instability in the banking system is difficult.” AFP
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