As a result of investors reducing their exposure to lenders from New York to Japan in the wake of Silicon Valley Bank’s failure, the market value of global financial equities has fallen by $465 billion in only two days.
According to Bloomberg, the MSCI Asia Pacific Financials Index lost as much as 3.1% on Tuesday, dropping to its lowest point since November 29.
In Japan, Mitsubishi UFJ Financial Group Inc. sank 8.6%, Hana Financial Group Inc. dropped 3.9%, and ANZ Group Holdings Ltd. of Australia dropped 1.5%.
There are worries that financial institutions’ investments in bonds and other securities may have an impact on the concern brought on by the SVB. After falling sharply on Monday, Treasury yields fluctuated on hopes that the Federal Reserve would delay hiking rates in light of the instability plaguing the banking system.
“The financial markets are walking on eggshells,” Credit Suisse Group AG’s chief investment officer for Asia-Pacific, John Woods, said in an interview with Bloomberg Television. “We must know with certainty what effect this is likely to have on the larger market. As this is mostly related to liquidity risk, in my opinion, the Fed will probably stop because it has to do with liquidity risk.”
Since Friday, the combined market value of the firms tracked by the MSCI Global Financials Index and the MSCI EM Financials Index has decreased by nearly $465 billion. While the KBW Regional Banking Index fell 7.7% on Monday, the biggest drop since June 2020, US regional banks were among the worst hit.
The MSCI Global Financials index’s largest loss over the past three sessions is First Republic Bank, whose shares have fallen about 73% in that time. All of the lender’s long-term ratings have been under review by Moody’s for a downgrade.
On Monday, shares of European banks and insurers also fell, with Credit Suisse Group AG’s stock falling 9.6% to a new record low due to concerns about SVB contagion. The business disclosed early on Tuesday that it had found “material flaws” and is adopting a remediation plan.
Japanese financial stocks have been among the hardest hit in the region. That follows a strong run-up since December amid signs the Bank of Japan was pivoting toward tightening after years of ultra-loose monetary policy.
According to statistics on over 130 Asia Pacific lenders with more than $5 billion in assets, Japanese banks consistently rank among the highest unrealized loss-to-equity ratios in the region. Among those having unrealized loss-to-equity ratios of at least 9% are Jimoto Holdings Inc., Tsukuba Bank Limited, and Fukushima Bank Limited. Each of the three, with market values under $150 million, has decreased more than 10% in just three days.
Chief fund manager at Nissay Asset Management Corp, Taku Ito, declared, “I’m selling banks and insurers today. “Without a sure, it’s a setback, but I believe many fund managers are acting similarly because bank shares have been growing and many growth managers have been increasing bank shares,” the fund manager said.