Fear of contagion from the failed SVB is causing sharp falls in Asian stocks

Shares on the Hong Kong Stock Exchange HSBCthe largest bank in Europe, fell 5.06% today until the break in the middle of the session after the group announced the purchase of the British branch of the failed American entity Silicon Valley Bank (SVB). Shares of the company in London, where it is also listed, lost 4.05% in the session on Monday.

The decline of HSBC, one of the values ​​with the largest market capitalization on the Hong Kong market, dragged down the financial sub-index (-2.59%), which in turn led to the decline of the Hang parquet benchmark. Seng (-1, 83%), following the global trend of fear for the banking sector.

HSBC yesterday announced the purchase – effective immediately – of SVB’s UK subsidiary, SVB UK, for the symbolic sum of one pound. As HSBC said in a statement to the Hong Kong stock exchange, as of last Friday – the day US regulators closed SVB -, the acquired entity had loans of around £5,500m ($6,663m, €6,211m) and deposits of £6,700m (8,116 million dollars, 7.567 million euros).

SVB UK, SVB’s first subsidiary outside the United States, posted gross profits of around £88m ($106.6m, €99.4m) in 2022. “This acquisition makes great strategic sense for our business in the UK. It strengthens our commercial banking franchise and enhances our ability to serve fast-growing and innovative businesses, including the technology and life sciences sectors, both in the UK and overseas,” said Group CEO Noel Quinn. “SVB UK customers can continue to use their banking services as usual, knowing that their deposits are backed by the strength, security and guarantee of HSBC,” the manager added.

SVB’s crisis began last Wednesday, when it announced it would seek a recapitalization to try to resolve its financial difficulties, which saw it take a loss of around $1.8 billion while shedding investments worth around $21,000 million.

The announcement led to many clients to withdraw their funds, after which U.S. regulators closed the bank specializing in emerging companies on Friday due to a lack of liquidity. After a weekend marked by uncertainty, US regulators announced on Sunday a plan for protect SVB’s deposits and allow clients to have access to their money deposited in the entity from the next day, although the shareholders and some of the company’s debtors will not be covered by these guarantees.

Sharp fell among Japan’s biggest banks on contagion fears

Meanwhile, Japan’s three biggest banks, Mitsubishi UFJ, Mizuho and Sumitomo Mitsui Financial Group, posted sharp declines today along with other Japanese entities in the sector in the first half of trading on the Tokyo Stock Exchange for fear of their exposure to the bankruptcy of SVB.

Tokyo Stock Exchange’s main index, the Nikkei, fell 1.91% at the half-session break, after paring a 2.6% drop in the morning, dragged down by jitters in the banking sector. He First Bank of Toyamabased in the center of the Japanese archipelago, plummeted 8.76% mid-session, the third-biggest drop among companies in the main section (those with the largest capitalization on the local stock market) without disclosing whether it was linked to SVB or the also-bankrupt Signature to the bank.

The company ACCESSwhich specializes in Internet services, posted the fourth-biggest drop in mid-morning, down 8.67%, after it disclosed that its US subsidiary IP Infusion has a capital deposit of about $11.6 million in SVB.

Despite the fact that the company assured in the statement that it believes that the impact of this event on operations and finances will be “insignificant”, investors reacted pessimistically.

The financial group Mitsubishi UFJ was the most traded company in the half session and fell by 6.04%, closely followed by its competitor Sumitomo Mitsui, which lost 6.03%. Asset management conglomerate Sumitomo Mitsui Trust – independent of the financial group of the same name, although with economic ties -, with a stake of around 2% in SVB, fell 4.17%.

Mizuho, ​​another major Japanese bank, also fell 5.76%. Also among the day’s best-traded and worst-stopped companies was tech group Softbank, Tokyo’s biggest stock, which devalued 3.67% in the first part of the session.

Softbank is not directly linked to SVB, but its huge investments in technology companies through its funds have raised concerns about the future of deposits and loans the latter could hold at the bankrupt financial institution, adding to its already penalized portfolio.