Asia’s major stock markets endured another turbulent day as fears of a banking crisis spread across trading floors in the wake of Swiss lender Credit Suisse’s struggles.
Markets were able to take a moment’s respite after Credit Suisse said it would be borrowing as much as 50 billion francs ($53.7 billion) from the Swiss central bank to steady itself, but trade remained tense as investors worried where banking stress might show up next.
Asian shares fell but without the frenzied drops seen overnight in Europe but any relief was tinged with fear of what may go wrong next.
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A week ago start-up lender Silicon Valley Bank failed and now a systemic bank in one of Europe’s financial capitals is in enough trouble to seek authorities’ help.
The shockwave was felt in Tokyo where Japan’s Nikkei share average trimmed losses after hitting a near two-month low in another volatile session.
The week has seen wild swings in Japanese banks, causing the Nikkei to fall below 27,000 for the first time since January 23, on fears of contagion from the Silicon Valley Bank meltdown and Credit Suisse’s woes.
The Nikkei recovered some losses to end 0.80% lower at 27,010,61, after falling to as low as 26,632.92, its lowest since January 20. The broader Topix index fell 1.17% to 1,937.10.
The banking sector pared losses but ended 3.26% lower. Among the biggest losers were Sumitomo Mitsui Trust Holdings, down 6.27%, and Japan Post Bank, down 5.2%.
Japan’s banking sector has been hurt mainly by the losses in Silicon Valley Bank’s bond portfolio, which have drawn attention to the risks for Japanese lenders’ gigantic foreign bond holdings, estimated to be carrying over 4 trillion yen ($30 billion) in unrealised losses.
China and Hong Kong stocks fell too, weighed by new energy and oil stocks and Credit Suisse’s woes.
China’s blue chip CSI300 Index was down 0.56% by the lunch break, while the Shanghai Composite Index lost 1.12%, or 36.42 points, to end at 3,226.89. The Shenzhen Composite Index on China’s second exchange retreated 1.53%, or 31.78 points, to 2,049.48.
The Hong Kong benchmark Hang Seng was down 1.72%, or 335.96 points, at 19,203.91, while the Hang Seng China Enterprises Index lost 0.86%
Elsewhere across the region, Sydney, Seoul, Singapore, Bangkok, Taipei, Manila and Jakarta were also down. Indian stocks advanced, though, with Mumbai’s signature Nifty 50 index up 0.13%, or 21.55 points, at 16.993.70.
MSCI’s index of Asia-Pacific shares outside Japan fell 1% to its lowest this year.
Globally, European futures were last up 2%, while S&P 500 futures rose 0.5% and safe assets like bonds, gold and dollars were in favour.
“I think we’re getting into the hard hat territory again,” said Damian Rooney, a dealer at Perth stockbroker Argonaut. “The word contagion is knocking about… we’re getting fear across the whole board here.”
Bonds have soared while markets have radically re-priced the interest rate outlook, betting central banks will be quickly cutting rates while stability fears rattle the financial system.
Two-year US Treasuries are eying their best week since 1987 and yields, which fall when prices rise, are down more than 66 basis points since Friday. An index of bond market volatility – the ICE BofA MOVE index – has hit its highest level since the 2008 financial crisis.
The European Central Bank’s meeting later on Thursday looms as a big test of the bond rally, as the first scheduled policy announcement since bank jitters began in the US last week.
“We’ve got to get through ECB and see how that goes down. And then the impact of that may well impact on what we think about the Fed next week,” said ING economist Rob Carnell.
“I think it’s going to be a very volatile period until we get this out of the way… it feels like at these interest rate levels the risk of finding that you’ve lifted a stone and something ugly is underneath gets higher.”
Tokyo – Nikkei 225 < DOWN 0.80% at 27,010.61 (close)
Hong Kong – Hang Seng Index < DOWN 1.72% at 19,203.91 (close)
Shanghai – Composite < DOWN 1.12% at 3,226.89 (close)
London – FTSE 100 > UP 0.60% at 7,388.77 (0933 GMT)
New York – Dow < DOWN 0.87% at 31,874.57 (Wednesday close)
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