Global financial stocks lose $465bn as markets react to SVB collapse

By Business AM

Global financial stocks have lost $465 billion in market value in three days, with the combined market capitalisation of the MSCI World Financials Index and MSCI EM Financials Index hardest hit as investors cut exposure to lenders from New York to Japan following the collapse of Silicon Valley Bank (SVB).

Market reports showed that losses widened on Tuesday morning, with the MSCI Asia Pacific Financials Index falling as much as 2.7 per cent to the lowest since November 29.

On a similar trend, Mitsubishi UFJ Financial Group slipped as much as 8.3 per cent in Japan while South Korea’s Hana Financial Group was down 4.7 per cent and Australia’s ANZ Group Holdings stumbled 2.8 per cent.

The declines came after US peers tumbled, with investors questioning whether a government rescue plan for the banking system would prevent more fallout from SVB’s collapse.

Bloomberg Intelligence analyst Francis Chan, in a note seen by Business A.M,observed that  major northern Asia banks mostly have minimal risk of the sudden run on deposits that crumpled Silicon Valley Bank, given their solid deposits, asset mixes and liquidity.

“Smaller lenders may harbour liquidity and credit risks that could easily be overlooked,”Chan added.

Meanwhile, there are still major concerns that financial companies could see an impact from their large investments in bonds and other financial instruments amid the SVB-induced turmoil.

In another development, two-year Treasury yields recorded their largest one-day plunge since the early 1980s on Monday,amid expectations the Federal Reserve will hold off raising interest rates due to recent turbulence in the banking system.

Michael Makdad, an analyst at American financial services firm, Morningstar, pointed to the need for an assessment of the likelihood of an economic hard landing in the US and odds of a pivot on interest rates by the Fed.

“If these things do not happen, today’s move in Japanese financial stocks looks like an overreaction to me,” Makdad said.