HSBC Holdings PLC, Europe’s biggest bank by assets, and Standard Chartered PLC fell in Hong Kong trading after Moody’s Investors Service said the turmoil in Cyprus may have negative implications for European bank ratings.
HSBC declined 2.3 percent, the most in almost six weeks, in Hong Kong. Standard Chartered, Britain’s second-largest lender by market value, slid 1.5 percent.
The MSCI Asia Pacific Financial Index lost 2.1 percent, heading for the biggest drop since July last year, as JPMorgan Chase & Co recommended betting against China’s biggest lenders.
European finance ministers reached an unprecedented agreement on Saturday forcing depositors in Cypriot banks to share in the cost of the latest eurozone bailout. Moody’s said the decision is negative for depositors in Europe and marks a significant step toward limiting systemic support for bank creditors in the region.
“From the social planning point of view and the idea of keeping depositor confidence in general, this is a terrible precedent to set,” said Jim Antos, a Hong Kong-based analyst at Mizuho Securities Asia Ltd. “People in Europe are probably going to think hard about how much money they should put in a tin can and bury in the back yard.”
Cypriot President Nicos Anastasiades, who bowed to demands by eurozone finance ministers to raise 5.8 billion euros (US$7.5 billion) by taking a piece of every bank account in Cyprus, appealed to the country’s lawmakers to ratify the levy yesterday.
“It is reasonable to expect that the deposit volatility in stressed sovereigns could rise,” Goldman Sachs Group Inc analysts led by Jernej Omahen wrote in a note to investors.
Still, any response from depositors in Italy, Ireland, Spain and Portugal would probably be limited as their “perception of banks has improved,” the analysts wrote.
Gareth Hewett, a Hong Kong-based spokesman for HSBC, declined to comment on its Cyprus operations.
Standard Chartered has no presence in the country and no direct sovereign exposure to Greece, Ireland, Italy, Portugal and Spain, said Doris Fan, a Hong Kong-based spokeswoman for the London-based bank.
HSBC’s gross on-balance sheet exposure to Cyprus was US$0.3 billion as of the end of last year, consisting primarily of loans to other financial institutions and companies, the London-based lender said in its latest annual report.
The bank’s US$2 billion of March 2022 securities offered a 132 basis-point spread, little changed from the previous trading day, Maxim Group LLC prices showed.
Standard Chartered’s US$2 billion of 3.95 percent bonds due January 2023 yielded 202 basis points more than Treasuries as of 11:35am yesterday in Hong Kong, little changed from Friday last week, ING Groep NV prices showed.
Moody’s said the support package for Cyprus reduces the immediate risk of a restructuring of its sovereign debt. European banks had US$39 billion in claims in Cyprus as of Sept. 30 last year, according to Bank for International Settlements data.
“While raising the risk of deposit flight out of peripheral banking systems, the agreement reflects euro area policymakers’ desire to avoid sovereign defaults in addition to Greece’s,” the ratings company wrote in its credit outlook.
Shares of Chinese banks declined as JPMorgan downgraded the country’s stock market to underweight and recommended bearish derivatives tied to its four biggest banks. Industrial & Commercial Bank of China Ltd (中國工商銀行), the country’s biggest lender by market value, dropped 3.1 percent in Hong Kong trading. China Construction Bank Corp (中國建設銀行), the third largest, fell 2.9 percent.
Rapid credit expansion, elevated property prices and a decline in potential growth have increased risks of a financial crisis in China, Nomura Holdings Inc said in a report on Friday last week.
Among the rows of vibrators, rubber torsos and leather harnesses at a Chinese sex toys exhibition in Shanghai this weekend, the beginnings of an artificial intelligence (AI)-driven shift in the industry quietly pulsed. China manufactures about 70 percent of the world’s sex toys, most of it the “hardware” on display at the fair — whether that be technicolor tentacled dildos or hyper-realistic personalized silicone dolls. Yet smart toys have been rising in popularity for some time. Many major European and US brands already offer tech-enhanced products that can enable long-distance love, monitor well-being and even bring people one step closer to
Malaysia’s leader yesterday announced plans to build a massive semiconductor design park, aiming to boost the Southeast Asian nation’s role in the global chip industry. A prominent player in the semiconductor industry for decades, Malaysia accounts for an estimated 13 percent of global back-end manufacturing, according to German tech giant Bosch. Now it wants to go beyond production and emerge as a chip design powerhouse too, Malaysian Prime Minister Anwar Ibrahim said. “I am pleased to announce the largest IC (integrated circuit) Design Park in Southeast Asia, that will house world-class anchor tenants and collaborate with global companies such as Arm [Holdings PLC],”
TRANSFORMATION: Taiwan is now home to the largest Google hardware research and development center outside of the US, thanks to the nation’s economic policies President Tsai Ing-wen (蔡英文) yesterday attended an event marking the opening of Google’s second hardware research and development (R&D) office in Taiwan, which was held at New Taipei City’s Banciao District (板橋). This signals Taiwan’s transformation into the world’s largest Google hardware research and development center outside of the US, validating the nation’s economic policy in the past eight years, she said. The “five plus two” innovative industries policy, “six core strategic industries” initiative and infrastructure projects have grown the national industry and established resilient supply chains that withstood the COVID-19 pandemic, Tsai said. Taiwan has improved investment conditions of the domestic economy
MAJOR BENEFICIARY: The company benefits from TSMC’s advanced packaging scarcity, given robust demand for Nvidia AI chips, analysts said ASE Technology Holding Co (ASE, 日月光投控), the world’s biggest chip packaging and testing service provider, yesterday said it is raising its equipment capital expenditure budget by 10 percent this year to expand leading-edge and advanced packing and testing capacity amid strong artificial intelligence (AI) and high-performance computing chip demand. This is on top of the 40 to 50 percent annual increase in its capital spending budget to more than the US$1.7 billion to announced in February. About half of the equipment capital expenditure would be spent on leading-edge and advanced packaging and testing technology, the company said. ASE is considered by analysts