Asian markets fall, while SVB fears the banking sector is rattling
Hong Kong (CNN) Asian stocks fell broadly on Tuesday, dragged down by banking stocks, as fears of the fallout from Silicon Valley Bank’s collapse gripped the market despite US government efforts to stabilize the financial system.
Japanese Nikkei 225 (N225) fell 2.19% to post its third straight day of decline. Hong Kong’s Hang Seng (HSI) briefly fell 2.5%, before paring losses in the afternoon. Korea̵[ads1]7;s Kospi (KOSPI) lost almost 3%. China’s Shanghai composite (SHCOMP) fell 0.65%.
The banks were the hardest hit sector in the entire region.
HSBC Holdings (HBCYF) plunged more than 5% in Hong Kong after the banking giant pledged to inject 2 billion pounds ($2.4 billion) of liquidity into SVB’s UK unit, which it had bought for 1 pound. Standard Chartered Bank fell almost 7 percent.
The sale occurred despite extraordinary measures by US regulators at the weekend to avert a potential banking crisis following the SVB collapse. The California-based lender fell with astonishing speed on Friday, marking the biggest US bank shutdown since 2008.
Investors are now in doubt whether SVB’s demise could trigger a wider banking sector melting down. On Monday, US stocks were mixed, with banking stocks taking a hit.
“Investors fear that other financial institutions are sitting on significant unrealized losses on their balance sheets due to markedly higher interest rates,” DBRS Morningstar analysts said Monday.
The fear was “irregardless of fundamentals,” they said.
US Treasury yields were sharply lower on Monday as investors flocked to safe assets. The yield on the 2-year Treasury was briefly down more than 50 basis points, the biggest daily drop in decades.
“At the moment, markets are speculating on a Fed reversal, but they are equally pricing in a greater degree of contagion in the banking sector turmoil, ultimately weighing on risk sentiment,” ING analysts wrote in a research note on Tuesday.
Should the Federal Reserve meet market expectations and end its rate-tightening cycle, there would be plenty of room for market sentiment to rebound, they said.
Other Asia Pacific bank stocks also fell.
In Hong Kong, shares in Bank of China (Hong Kong) and Hang Seng Bank fell 3.7% and 1.3% respectively. Pan-Asian insurer AIA Group traded down 4.7%.
In Tokyo, Mitsubishi UFJ Financial Group, Japan’s biggest bank, lost 8.4%. Sumitomo Mitsui Financial Group and Mizuho Financial Group both fell more than 7%.
In Seoul, KB Financial Group and Shinhan Financial Group fell 3.6% and 2.5% respectively.
In Shanghai, China Merchants Bank fell 1.2% and China Minsheng Banking Corp retreated 0.3%.
In Sydney, Macquarie Group retreated 3.1% and ANZ Group was 1.5% lower.
