SINGAPORE: Asian financial stocks fell for a second day as the failure of Silicon Valley Bank deepened concerns that soaring interest rates are eroding balance sheets across the sector.
The MSCI AC Asia Pacific Financials Index dropped as much as 1.3% on Monday, hitting its lowest level since Dec 20 and adding to Friday’s 2.2% slump. Japanese bank shares were particularly hard hit, with a gauge tracking the sector falling as much as 4.8% after slumping 5.4% on Friday.
Asian lenders declined even as US authorities raced on Sunday to stem jitters about the health of the nation’s financial system, pledging to fully protect all depositors’ money following the collapse of Silicon Valley Bank while also giving any banks squeezed for cash easier terms on short-term loans.
“The market should not underestimate the risks of SVB saga, as its problems are not unique, including rising financing costs and huge investment losses due to asset-debt maturity mismatch,” CICC analysts including Liu Zhengning wrote in a note dated March 11.
It may be worth paying “attention to non-bank financial institutions, which may be sitting on high leverage and maturity mismatch as they stayed in the low-interest environment for too long”.
Mitsubishi UFJ Financial Group Inc, Sumitomo Mitsui Financial Group Inc and Japan Post Bank Co all fell more than 3%. Korea’s Shinhan Financial Group Co and Hana Financial Group Inc, as well as Australia’s ANZ Group Holdings Ltd and National Australia Bank Ltd dropped more than 1% each at one point.
To be sure, some market participants have said that Asia will likely face limited contagion risk due to superior growth prospects, lenders’ diverse customer base, and improving asset quality. US stock index futures jumped during Asia trading hours on news of the government’s support for banks.
Elsewhere, a measure of the biggest Philippine banks slid as much as 1.9% as all of its nine components declined. Bank of the Philippine Islands, Security Bank Corp and Rizal Commercial Banking Corp. each fell more than 2%.
“The point that caught the eye of the bond market is that SVB has sold most of its available-for-sale (AFS) bonds, which carried net unrealised losses,” Masao Muraki, an analyst at SMBC Nikko Securities, wrote in a March 10 note. “There are concerns that other US banks and Japanese banks/life insurers will follow suit amid renewed inflation fears and rising long- and short-term interest rates.”