Asian Stocks Drop Following Collapse of Silicon Valley Bank

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Asian Stocks Drop Following Collapse of Silicon Valley Bank

Shares of Asian banks fell after the collapse of US-based Silicon Valley Bank amid fears of systemic risk, while the US government stepped in with emergency measures to shore up confidence in the banking system. US banks lost over $100 billion in stock market value late last week, while European banks lost around another $50 billion in value.

What You Need to Know About Trading Stocks Right Now

Shares of banks in Asia took a tumble on Monday after the collapse of Silicon Valley Bank (SVB), a US startup-focused bank. This sparked a global flight to quality amid fears of broader systemic risk, even as authorities took steps to placate depositors.

US regulators have reassured depositors that they will have access to all their deposits starting Monday, while the Federal Reserve has made it easier for banks to borrow from it in emergencies. Though US stock futures and tech shares rose in Asia trade on the back of the news, banks in the region were unable to shake concerns about systemic risk and tracked losses in their Wall Street counterparts from the Friday session.

Bank Stocks Suffer Losses

In Hong Kong, shares of HSBC Holdings (0005.HK) opened roughly 1.7% lower at a two-month trough while Standard Chartered Bank (2888.HK) shares fell nearly 1% to a one-month low. Meanwhile, US banks lost over $100 billion in stock market value last week following the collapse, while European banks lost around another $50 billion in value, according to a Reuters calculation.

“The Fed are not only addressing concerns over the bank’s asset side of the balance sheet but on the liability side, where they are essentially stepping in front of a larger bank run, which…can be devastatingly swift to bring down any institution,”

Chris Weston, head of research at Pepperstone

Further Migrations to Stronger Banks

Chris Weston also noted that there’s likely going to be further migrations to the stronger banks and those with a large asset base and low equity will continue to see depositors divest capital. SVB’s collapse comes alongside the closure of crypto-focused bank Silvergate (SI.N), which last week disclosed plans to wind down operations and voluntarily liquidate, in the aftermath of FTX’s implosion last year.

US state regulators also closed New York-based Signature Bank (SBNY.O), which became the next casualty of the banking turmoil after SVB. Meanwhile, in Japan, Mitsubishi UFJ (8306.T) slid nearly 4% to a one-month low of 896.3 yen, while Sumitomo Mitsui Financial Group (8316.T) tumbled almost 5%. The broader Topix Banks Index (.IBNKS.T) was last 4.75% lower as of the midday break.

Singapore’s largest bank DBS (DBSM.SI) and OCBC’s shares (OCBC.SI) lost close to 1.5% and slid to their lowest levels since late October last year. These losses were largely due to concerns about the global financial system and its future prospects, as well as the impact of the COVID-19 pandemic on the banks’ loan portfolios.

In conclusion, the collapse of Silicon Valley Bank and the broader systemic risk fears that it has triggered have sent shockwaves through the global banking system. While emergency measures from the U.S. administration and Federal Reserve have helped to shore up confidence, banks in Asia have struggled to shake concerns about systemic risk and have tracked losses in their Wall Street counterparts.

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The impact of SVB’s collapse and the closure of other banks will likely continue to be felt across the industry, with depositors likely to migrate towards stronger banks with larger asset bases and lower equity. The situation highlights the importance of monitoring broader industry trends and staying vigilant about the risks and rewards of investing in penny stocks.

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