Asian markets fall as fears of fallout from Silicon Valley Bank closure rock banking sector

() — Asian stocks fell sharply on Tuesday, dragged down by bank stocks, as fears over the fallout from the Silicon Valley Bank (SVB) collapse gripped the market despite efforts by the US government to stabilize the system. financial.

Japan’s Nikkei 225 fell 2.19%, posting its third consecutive day of declines. Hong Kong’s Hang Seng briefly fell 2.5%, before paring losses in the afternoon. Korea’s Kospi lost almost 3%. China’s Shanghai Composite lost 0.65%.

Banks were the most affected sector in the entire region.

HSBC Holdings plunged more than 5% in Hong Kong after the banking giant pledged to inject 2 billion pounds ($2.4 billion) of liquidity into the UK unit of SVB, which he had bought for 1 pound. Standard Chartered Bank sank nearly 7%.

The sell-off came despite extraordinary measures taken by US regulators over the weekend to prevent a possible banking crisis following the collapse of SVB. The California-based lender fell with astonishing speed on Friday, marking the biggest US bank shutdown since 2008.

Investors are now nervous about whether SVB’s demise could trigger a broader collapse of the banking sector. On Monday, US stocks were mixed, with bank stocks hit.

“Investors fear that other financial institutions will have significant unrealized losses on their balance sheets due to sharply higher interest rates,” analysts at DBRS Morningstar said Monday.

The fear was “regardless of the fundamentals,” they said.

US Treasury Department yields fell sharply on Monday as investors flocked to safe-haven assets. The 2-year Treasury yield briefly dipped more than 50 basis points, the biggest one-day drop in decades.

“Right now, markets are speculating on a U-turn from the Fed, but are also pricing in a greater degree of contagion in the banking sector turbulence, which is ultimately weighing on risk sentiment,” they wrote. ING analysts in a research note on Tuesday.

If the Federal Reserve were to accommodate market hopes and finish its interest rate tightening cycle, there would be ample scope for market sentiment to pick up, they said.

Workers at the New York Stock Exchange during negotiations on the morning of March 13, 2023. (Credit: Michael M. Santiago/Getty Images)

Other Asia Pacific bank stocks also fell.

In Hong Kong, shares of Bank of China (Hong Kong) and Hang Seng Bank fell 3.7% and 1.3% respectively. Pan-Asian insurer AIA Group fell 4.7%.

In Tokyo, Mitsubishi UFJ Financial Group, Japan’s largest bank, lost 8.4%. Sumitomo Mitsui Financial Group and Mizuho Financial Group 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 fell 0.3%.

In Sydney, Macquarie Group fell 3.1% and ANZ Group dropped 1.5%.