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Asian bank selloff resumes with Credit Suisse as fresh trigger

Bloomberg
Bloomberg • 3 min read
Asian bank selloff resumes with Credit Suisse as fresh trigger
Investors are on tenterhooks as Credit Suisse’s troubles add to concerns about stress in the global banking system. Photo: Bloomberg
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Asian bank stocks slid, resuming a selloff as worries over the health of Credit Suisse Group AG compounded concerns sparked by the sudden collapse of Silicon Valley Bank.

The MSCI Asia Pacific Financials Index slid as much as 1.9%, headed for its fourth loss in five sessions. Japanese megabanks were again among the biggest drags, though Mitsubishi UFJ Financial Group Inc. and Sumitomo Mitsui Financial Group Inc. pared early losses of more than 6% after Credit Suisse said it secured funding support from the Swiss National Bank.

Investors are on tenterhooks as Credit Suisse’s troubles add to concerns about stress in the global banking system, which were sparked by the sudden collapse of three US institutions. Credit Suisse’s shares plunged by a record 24% Wednesday as Saudi National Bank, which became its biggest shareholder late last year, ruled out adding to its stake.

The slide in Credit Suisse’s stock “sparked a crisis of confidence that reverberated globally,” Mark Chadwick, an analyst, wrote in a note on Smartkarma. “Confidence is a crucial factor in the financial system, and this recent development shows how easily it can be shaken.”

Credit Suisse’s American depositary receipts rebounded in extended US trading, however, after Switzerland’s central bank and financial regulator said the bank will receive a liquidity backstop if needed.

See also: MAS fines Credit Suisse $3.9 mil for misconduct by its relationship managers

The Swiss lender quickly followed this up early Thursday in Asia to say it will borrow as much as 50 billion francs (US$54 billion or $72.96 billion) from a SNB liquidity facility as it offers to repurchase debt. Still, concerns of spreading bank risk rippled through Asia.

Concerns about the health of the global financial system will also likely test the Federal Reserve’s resolve to raise rates further to get inflation under control.

“We were hoping that the storm had passed but this issue has added to more concerns regarding the global banking system, although CS is yet another isolated issue,” said Amir Anvarzadeh, a strategist at Asymmetric Advisors. A quarter-point US rate increase “still looks likely, as any halt in rate hikes would signal that the Fed is panicking.”

See also: Credit Suisse's Singapore private bankers moving to UBS offices

Asia Concern

Among other financial stocks, insurer AIA Group Ltd. slid as much as 5.8% in Hong Kong on Thursday, Hana Financial Group Inc. was down 3.8% in Seoul and ANZ Group Holdings Ltd. dropped 2.6% in Sydney.

Japanese banks feature prominently among the highest unrealized loss-to-equity ratios in the region, according to data compiled by Bloomberg on about 130 Asia Pacific lenders with more than $5 billion in assets. Jimoto Holdings Inc., Tsukuba Bank Ltd. and Fukushima Bank Ltd. are among those with unrealized loss-to-equity ratios of at least 9%. The three stocks are each down more than 10% this week.

Still, direct risks in Asia are seen as limited by many market watchers.

“There are no particular institutions like Credit Suisse that the market is concerned about in Asia, but an outlook of lower interest rates is negative for Japanese bank shares, and issues with USD liquidity always affect Korea,” said Michael Makdad, senior analyst at Morningstar.

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