Investors reduced their exposure to lenders after the Silicon Valley bank collapse. (File)
Global financial stocks lost $465 billion in market value in two days as investors cut exposure to lenders from New York to Japan after the collapse of a Silicon Valley bank.
Losses widened today, with the MSCI Asia Pacific Financials Index falling 2.7% to its lowest since November 29. Mitsubishi UFJ Financial Group Inc. Japan fell by 8.3%, while South Korean Hana Financial Group Inc. decreased by 4.7%. % and Australian ANZ Group Holdings Ltd. lost 2.8%.
There are concerns that financial firms may see the impact of their investments in bonds and other instruments on concerns raised by SVB. Treasury yields fell on Monday amid expectations that the Federal Reserve would hold off on raising rates amid stress in the banking system.
“Financial markets are walking on eggshells,” John Woods, Credit Suisse Group AG’s chief investment officer for the Asia-Pacific region, said in an interview with Bloomberg Television. “We need to be clear about what impact this might have on the wider market. I think the Fed is likely to take a break because I think it’s mostly about liquidity risk.”
The combined market value of the companies included in the MSCI World Financials Index and the MSCI EM Financials Index has fallen by about $465 billion since Friday. Regional US banks were among the hardest hit on Monday, as the KBW Regional Bank Index fell 7.7%, its steepest decline since June 2020.
In a note, Bloomberg Intelligence analyst Francis Chan wrote that the big banks in North Asia are largely “less vulnerable to a sudden deposit collapse that broke the Silicon Valley bank” given their solid deposits, asset mix and liquidity. “Small lenders can have liquidity and credit risks that can be easily overlooked.”
Japanese banks have some of the highest unrealized loss and 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. among those with an unrealized loss-to-equity ratio of at least 9%.
All three, each with a market cap of less than $150 million, fell more than 10% in three days. Japanese financial stocks have risen since December amid signs that the country’s central bank is turning to tightening after an overly loose monetary policy.
“I’m selling banks and insurers today,” said Taku Ito, chief fund manager at Nissay Asset Management Corp. “It’s definitely a loss, but I think a lot of fund managers are doing the same because bank stocks are going up. A lot of growth managers are increasing bank stocks.”
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