Asian financial stocks fell for a second day as the failure of Silicon Valley Bank (SVB) deepened concerns that soaring interest rates are eroding balance sheets across the sector.
The MSCI AC Asia Pacific Financials Index dropped as much as 1.3 percent yesterday, hitting its lowest level since Dec. 20 and adding to Friday’s 2.2 percent slump.
Japanese bank shares were particularly hard hit, with a gauge tracking the sector falling 4 percent after slumping 5.4 percent on Friday.
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Asian lenders declined even as US authorities on Sunday raced to stem jitters about the health of the nation’s financial system, pledging to fully protect all depositors’ money following the collapse of SVB while also giving any banks squeezed for cash easier terms on short-term loans.
Fears of contagion from the largest US bank failure since the 2008 financial crisis are spreading around the world, upending the outlook for everything from riskier assets to US interest rates.
Despite US government intervention, stalwart investors such as Pershing Square founder Bill Ackman predict more casualties in the US banking system, and some start-up founders have warned that SVB’s failure could lead to wipeouts in the sector.
“The market should not underestimate the risks of SVB saga, as its problems are not unique, including rising financing costs and huge investment losses due to asset-debt maturity mismatch,” China International Capital Corp (中國國際金融) analysts including Liu Zhengning (劉政寧) wrote in a note on Saturday.
It might be worth showing some “attention to non-bank financial institutions, which may be sitting on high leverage and maturity mismatch as they stayed in low interest environment for too long,” they said.
Mitsubishi UFJ Financial Group Inc, Sumitomo Mitsui Financial Group Inc and Japan Post Bank Co all fell more than 3 percent. South Korea’s Shinhan Financial Group Co and Hana Financial Group Inc slumped before erasing losses, while Australia’s ANZ Group Holdings Ltd and National Australia Bank Ltd dropped more than 1.5 percent each.
“The point that caught the eye of the bond market is that SVB has sold most of its available-for-sale bonds, which carried net unrealized losses,” SMBC Nikko Securities analyst Masao Muraki wrote in a note on Friday.
“There are concerns that other US banks and Japanese banks/life insurers will follow suit amid renewed inflation fears and rising long and short-term interest rates,” Muraki wrote.
To be sure, some market participants have said that Asia is likely to face limited contagion risk due to superior growth prospects, lenders’ diverse customer base and improving asset quality.
Banking stocks in China and India bucked a broader weakness in the sector amid low exposure to the US. Industrial and Commercial Bank of China (中國工商銀行) rose as much as 3 percent, while India’s ICICI Bank Ltd advanced 1.5 percent.
Elsewhere, a measure of the biggest Philippine banks slid as much as 1.9 percent as all of its nine components declined. Bank of the Philippine Islands, Security Bank Corp and Rizal Commercial Banking Corp each fell more than 2 percent.
The US dollar was trading at NT$29.7 at 10am today on the Taipei Foreign Exchange, as the New Taiwan dollar gained NT$1.364 from the previous close last week. The NT dollar continued to rise today, after surging 3.07 percent on Friday. After opening at NT$30.91, the NT dollar gained more than NT$1 in just 15 minutes, briefly passing the NT$30 mark. Before the US Department of the Treasury's semi-annual currency report came out, expectations that the NT dollar would keep rising were already building. The NT dollar on Friday closed at NT$31.064, up by NT$0.953 — a 3.07 percent single-day gain. Today,
‘SHORT TERM’: The local currency would likely remain strong in the near term, driven by anticipated US trade pressure, capital inflows and expectations of a US Fed rate cut The US dollar is expected to fall below NT$30 in the near term, as traders anticipate increased pressure from Washington for Taiwan to allow the New Taiwan dollar to appreciate, Cathay United Bank (國泰世華銀行) chief economist Lin Chi-chao (林啟超) said. Following a sharp drop in the greenback against the NT dollar on Friday, Lin told the Central News Agency that the local currency is likely to remain strong in the short term, driven in part by market psychology surrounding anticipated US policy pressure. On Friday, the US dollar fell NT$0.953, or 3.07 percent, closing at NT$31.064 — its lowest level since Jan.
Hong Kong authorities ramped up sales of the local dollar as the greenback’s slide threatened the foreign-exchange peg. The Hong Kong Monetary Authority (HKMA) sold a record HK$60.5 billion (US$7.8 billion) of the city’s currency, according to an alert sent on its Bloomberg page yesterday in Asia, after it tested the upper end of its trading band. That added to the HK$56.1 billion of sales versus the greenback since Friday. The rapid intervention signals efforts from the city’s authorities to limit the local currency’s moves within its HK$7.75 to HK$7.85 per US dollar trading band. Heavy sales of the local dollar by
The Financial Supervisory Commission (FSC) yesterday met with some of the nation’s largest insurance companies as a skyrocketing New Taiwan dollar piles pressure on their hundreds of billions of dollars in US bond investments. The commission has asked some life insurance firms, among the biggest Asian holders of US debt, to discuss how the rapidly strengthening NT dollar has impacted their operations, people familiar with the matter said. The meeting took place as the NT dollar jumped as much as 5 percent yesterday, its biggest intraday gain in more than three decades. The local currency surged as exporters rushed to
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