Banking stocks in Asia fell on Thursday, dragging the broader markets lower, as troubles at Credit Suisse sparked fears that banking turmoil is spreading around the world.
News that the beleaguered megabank has taken up the Swiss central bank’s offer of financial support in order to stay afloat has limited the worst of the losses.
The lender said it would borrow up to 50 billion Swiss Francs ($53.7 billion) from the Swiss National Bank. Investors sent shares in Switzerland’s second biggest lender crashing by as much as 30% Wednesday.
The bank called the loan a “decisive action to pre-emptively strengthen its liquidity.”
Japan’s Topix Banks Index, a key index that tracks Japanese lenders, tumbled as much as 6.4% in the morning session. It then trimmed some losses and was last trading 3.7% lower. The index has lost more than 8% so far this week.
In Hong Kong, Standard Chartered
(SCBFF) sank nearly 4%. HSBC Holdings
(HSBCPRA) dropped 2.5%. Local bank BOC Hong Kong was down 3.1%.
In South Korea, major lenders Shinhan Financial Group and KB Financial Group declined 1.2% and 0.5% respectively.
“What we are seeing is a definite unravelling of investor confidence across both the tech and banking sectors,” said Clifford Bennett, chief economist at ACY Securities, a Sydney-based online broker. “It is highly unlikely these concerns are going to simply vanish any time soon.”
“Regardless of balance sheets, a loss of confidence by investors and depositors can bring down any bank,” he added.
Japan’s benchmark Nikkei 225
(N225) was down as much as 2.2% in early trade. It was last trading 0.9% lower. Hong Kong’s Hang Seng
(HSI) shed 1.3%. China’s Shanghai Composite edged down 0.4%.
Korea’s Kospi fell as much as 1.4%, but then reversed all losses and was last trading flat.
The Korean won weakened sharply against the US dollar, down nearly 1% in morning trading, as investors piled into traditional safe-haven currencies such as the greenback. The Chinese yuan also softened versus the dollar, down 0.1%.
Banking shares were hammered in Europe and New York on Wednesday after shares in Credit Suisse fell to a new record low, which rattled investors already reeling from the rapid collapse of two US banks within a week.
The bank failures had already forced US regulators to take emergency measures on Sunday to protect deposits at both lenders: Silicon Valley Bank and Signature Bank.
“Markets could get messy amid the fallout from Silicon Valley Bank’s collapse, alongside ongoing uncertainty over the future path of the global economy and interest rates,” said Marty Dropkin, head of equities for Asia Pacific at Fidelity International.
He noted that companies have begun to give more cautious guidance. There have also been an increasing number of layoff announcements.
“These are glaring indications that businesses are beginning to feel pressure on their profit margins,” he said. “We believe an earnings correction will occur this year.”