Equity markets fall amid SVB contagion fears
Asian markets took a deep dive on Tuesday, impacted by the closure of two US banks over the weekend, with signs that European equities would also be affected.
Investors are fleeing the sector in fear of a possible US banking crisis, similar to the 2008 financial crisis.
What happened to the markets?
Stocks were deep in the red in Asian trading across major markets including Tokyo, Hong Kong, Seoul, Sydney, Taipei, Manila, Jakarta, Bangkok, Shanghai, Mumbai and Singapore.
Japan’s main and most respected stock index, Nikkei, fell 2.2%, while the Tokyo Stock Exchange’s banks index fell more than 7%. Meanwhile, Hong Kong shares in HSBC and Standard Chartered fell to more than 5%.
Bank shares in Singapore and Australia also fell.
“So far, the authorities’ measures have prevented a run on US banks for deposits, but they have not been enough to prevent a run on banks by investors,” Rodrigo Catril of National Australia Bank told French news agency AFP.
“The risk of a financial crisis remains high and investors have rushed to reduce their exposure to the sector.”
In early trade, London’s FTSE 100 index fell 0.6% to 7,503.85 points, compared with the close of business on Monday.
Why are investors scared?
On Friday, US regulators shut down Silicon Valley Bank in the biggest bank failure since the 2008/2009 financial crisis, following a sudden run on deposits.
Then, on Sunday, the Signature Bank of New York followed suit, while the US Federal Reserve took steps to bolster systemic confidence.
A major lender to tech startups, SVB was the 16th largest bank in the US.
However, continued interest rate hikes aimed at curbing inflation affected the bank’s assets as well as the bank’s customers, triggering a migration of deposits. The bank had to sell bonds at a loss to cover the withdrawals.
Source: DW
Lori Barajas is an accomplished journalist, known for her insightful and thought-provoking writing on economy. She currently works as a writer at 247 news reel. With a passion for understanding the economy, Lori’s writing delves deep into the financial issues that matter most, providing readers with a unique perspective on current events.