Hong Kong: Stocks hit 3-month low on bank contagion fears; China ends down

HONG Kong shares dropped to a three-month low on Monday (Mar 20), led by banking stocks, as a government-orchestrated acquisition of Credit Suisse by UBS failed to ease market concerns of risk contagion.

China stocks also ended lower, erasing earlier gains, despite Beijing’s fresh monetary-easing measures to support economic growth.

Hong Kong’s benchmark Hang Seng Index slumped 2.7 per cent, the lowest close since early December. The Hang Seng China Enterprises Index lost 2.2 per cent.

China’s blue-chip CSI300 Index and the Shanghai Composite Index both lost about 0.5 per cent.

Investors remained fearful about what could happen next after a week in which Credit Suisse – a systemically important lender in one of Europe’s financial capitals – was brought to its knees by the turmoil in the bond market resulting from the collapse of Silicon Valley Bank, sending Asian shares lower.

Over the weekend, UBS said it would buy Credit Suisse for 3 billion Swiss francs (S$4.3 billion) and assume up to US$5.4 billion in losses, a shotgun merger engineered by Swiss authorities that investors hope can head off an even bigger mess in global markets.

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Hong Kong-listed banking stocks tumbled nevertheless on Monday, as the complete write-off of the troubled bank’s bond value soured sentiment.

HSBC’s Hong Kong listed shares slumped more than 6 per cent, posting the biggest one-day percentage loss in nearly six months. Bank of East Asia shares dropped more than 4 per cent to a 10-week low. Standard Chartered tumbled more than 7 per cent, the worst performance in a year.

Tech giants listed in Hong Kong tumbled 2.8 per cent, while healthcare stocks plunged 4.1 per cent.

China stocks fell even after the country’s central bank said on Friday it would cut the amount of cash that banks must hold as reserves for the first time this year to help keep liquidity ample and support a nascent economic recovery. REUTERS