Hang Seng Index, ASX200, Nikkei 225: Under Pressure as SVB Collapse Sparks Contagion Fears

Key Takeaways

• SVB collapse causes contagion fears, and global markets fall
• China and Hong Kong stocks plummet, banking shares take the hit
• Japanese and Australian markets follow suit, and investors fear further fallout

Hong Kong/China Overview

China and Hong Kong stocks suffered a sharp decline on Tuesday, with fears of contagion from the collapse of Silicon Valley Bank (SVB) continuing to impact the markets.

The blue-chip CSI300 Index in China was down 0.8%, reaching its lowest level since January, while Hong Kong’s benchmark Hang Seng index and China Enterprises index both slumped by 1.8%.

Banking shares saw significant losses, as concerns about a possible US banking crisis sent shockwaves through Asian markets. The S&P Banking Index fell by 7% overnight. Chinese financial shares dropped by 1.2%, and bank shares lost 0.7%, while Hang Seng’s finance subindex fell by 2.6%.

The markets also reacted to news that Chinese President Xi Jinping is planning to visit Russia to meet with Vladimir Putin next week.

US President Joe Biden, who recently unveiled a submarine deal to counter China, said he expected to speak with Xi soon, but did not give a date.

In addition, tech giants listed in Hong Kong experienced a 2.1% drop, with Alibaba losing 3.7% and Meituan down 2.8%.

Chinese tourism stocks, airline shares, and hotel operators also fell, despite news that China would reopen its borders to foreign tourists by restoring the issuance of all types of visas from Wednesday.

Alicia Garcia Herrero, chief economist Asia Pacific at Natixis, warned that China’s growth would remain meager as the economy is in a state of “structural deceleration.”

Nikkei Overview

On Tuesday, Japanese banking shares fell to their lowest in almost three months, leading to a decline of more than 2% in the Nikkei share average. Despite Japanese officials offering reassurances, the market remains volatile.

Investors are concerned about contagion from the collapse of Silicon Valley Bank, which has led to a global flight to quality that has flattened yield curves. This has cut the outlook for profits and put additional pressure on lenders.

The outlook for further Federal Reserve rate increases has also been reduced, along with the chances for a hawkish shift at the Bank of Japan.

The TSE banking index fell as much as 7.5% in the first hour of trading. Sumitomo Mitsui Financial Group and Mitsubishi UFJ Financial Group both slid more than 7%.

Nissan, Mitsubishi Motors, and Mazda also slumped by around 6%.

The Nikkei was 2.3% lower at 27,189.87, near the session low of 27,104.75, a level last seen on Feb. 22. The broader Topix sank 2.9% to 1,942.61, with the yen’s surge putting pressure on exporters by cutting the value of their overseas revenues.

ASX Overview

Australian shares fell over 2% to their lowest level since early January on Tuesday. The selling was led by mining and banking stocks. Traders worried about the financial fallout from the collapse of Silicon Valley Bank last week.

Financial stocks slipped 2.8% to hit a more than five-month low. While heavyweight miners shed 1.4% on news that Chinese regulators might curb inflated iron ore prices.

Energy stocks dived over 3%, hitting their lowest since October, as oil prices slid about 2% overnight.

Technology stocks retreated 3.7%. Gold stocks were a lone bright spot on the benchmark, up 2.6% to hit a four-week high.