Asia Stocks Tumble as SVB Collapse Sparks Contagion Panic

Asia Stocks Tumble as SVB Collapse Sparks Contagion Panic

March 14, 2023

Asian stocks were battered on Tuesday as the shockwave from the collapse of Silicon Valley Bank (SVB) hit hard, sending banking equities tumbling across the region.

Assurances from President Joe Biden and other policymakers did little to calm the markets and prompted a rethink on the interest rate outlook.

Biden’s efforts to reassure markets and depositors came after emergency US measures to shore up banks by giving them access to additional funding failed to dispel investor worries about potential contagion to other lenders worldwide.

Banking stocks in Asia extended those declines, with Japanese firms hit particularly hard and anxiety about systemic risk leading the wider market lower.

Tokyo banking shares tumbled their most since the onset of the Covid-19 pandemic, dragging the Nikkei share average down more than 2%, as investors tried to gauge the fallout from the collapse of the US lender.

Yields on Japanese government bonds plunged to multi-month lows – with 10-year yields sliding to 0.24% for the first time since November – as they tracked US peers amid a global flight to quality.

Yield curves have flattened, putting additional weight on banks by cutting the outlook for lending profit.

Contagion fears also spurred investors to rein in expectations for how soon the Bank of Japan could loosen or even scrap its peg on long-term JGB yields – bets that had driven the Tokyo Stock Exchange’s banking index up nearly 28% since late-December to the highest since 2015 last week.

The Nikkei sank 2.19% to end at 27,222.04, its worst day in nearly four months. The session low of 27,104.75 had not been seen since February 22.

The broader Topix, which is more influenced by swings in bank stocks than the tech-heavy Nikkei, fell 2.67% to 1,947.54, its biggest drop since late September. At one point it was down as much as 3.2% at 1,935.62, the lowest since January 20.

The steep declines came despite more assurances from Japanese officials, with Finance Minister Shunichi Suzuki telling reporters on Tuesday he did not expect SVB’s failure to have a big impact on Japan’s economy or financial system. He declined to comment on its potential impact on BOJ policy.

HK Finance Subindex Slumps

China and Hong Kong stocks fell to their lowest in more than two months, as fears about contagion from the collapse of SVB lingered.

In Hong Kong, the Hang Seng’s finance subindex tumbled 3.0%, with HSBC Holdings down 4.7% and AIA Group Ltd losing 4.4%. 

Tech giants listed in Hong Kong fell 2.6%, with Alibaba Group Holding Ltd shedding 3.9% and Meituan down 2.8%...

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