Asia: Stocks rally as banking anxiety eases; Alibaba surges

ASIAN shares rose sharply on Wednesday (Mar 29) while the dollar was on the defensive as easing concerns over the banking sector revived risk appetite, while Alibaba’s stock soared on the Internet behemoth’s plans to split into six units.

MSCI’s broadest index of Asia-Pacific shares outside Japan was 0.82 per cent higher, while Japan’s Nikkei advanced 0.49 per cent.

Hong Kong’s Hang Seng index surged over 2 per cent, buoyed by Alibaba after the Chinese e-commerce conglomerate announced its break-up plans. Alibaba’s Hong Kong shares shot up 15 per cent, while the company’s US-listed shares closed 14.3 per cent higher.

The news lifted investor confidence in the wider Chinese tech sector, with shares of Alibaba’s e-commerce rival JD.com 7 per cent higher, and gaming giant Tencent Holdings jumping 5 per cent.

China’s CSI 300 benchmark edged up 0.4 per cent.

Following weeks of volatility in the market after the unexpected failure of two US banks and the rescue of Credit Suisse in Europe, investor nerves were calmed this week by the sale of assets in collapsed lender Silicon Valley Bank (SVB) and no new signs of further stresses in the banking system.

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“The lack of any substantive developments in the banking backdrop has seen markets relatively calm by the standards of recent weeks,” said Taylor Nugent, an economist at National Australia Bank.

In the first congressional hearing into the collapse of the two US regional lenders, lawmakers pressed the Federal Reserve’s top banking regulator on whether the central bank should have been more aggressive in its oversight of SVB.

Michael Barr, the Fed’s vice chairman for supervision, criticised SVB for going months without a chief risk officer and how it modelled interest rate risk.

“Investors have not completely lost their anxiety ... and hints of a big regulatory overhaul are likely to weigh on the sector until details emerge,” said Robert Carnell, regional head of research, Asia-Pacific at ING.

Overnight, a survey showed that US consumer confidence unexpectedly increased in March despite recent financial market turmoil, but Americans continued to expect inflation to remain elevated over the next year.

Worries over inflation have prompted investors to recalculate what they expect the Fed to do in its next meeting in May.

Markets are now pricing in a 51 per cent chance of the Fed standing still on interest rates in its next meeting, down from 60 per cent chance a day earlier, the CME FedWatch tool showed.

In the foreign exchange markets, the dollar index, which measures the US currency against six peers, was mostly flat, having eased 0.3 per cent overnight on improving risk appetite.

The euro was up 0.01 per cent to US$1.0844, while sterling was last trading at US$1.2334, down 0.05 per cent on the day.

The Japanese yen weakened 0.56 per cent to 131.63 per dollar, after rising 0.5 per cent overnight.

The Australian dollar fell 0.13 per cent to US$0.670 after inflation slowed to an eight-month low in February, thanks in part to a sharp retreat in holiday travel and accommodation.

“Together with yesterday’s softish retail sales figures, this will encourage thoughts of a pause from the Reserve Bank of Australia at their next meeting, and potentially that this tightening cycle might now be over,” said ING’s Carnell.

In the commodities market, oil prices gained for third straight day on improving market sentiment and as a halt to some exports from Iraqi Kurdistan raised concerns of tightening supply. US crude rose 0.71 per cent to US$73.72 per barrel and Brent was at US$79.00, up 0.45 per cent on the day.

Spot gold dropped 0.3 per cent to US$1,968.37 an ounce after rising 1 per cent on Tuesday. REUTERS