Global financial stocks lose $465 billion on SVB impact worry

An electronic stock board inside the Kabuto One building in Tokyo, Japan, on Monday, Nov. 21, 2022. The world's central banks must keep raising interest rates to fight soaring and pervasive inflation, even as the global economy sinks into a significant slowdown, the OECD said. Photographer: SeongJoon Cho/Bloomberg

Global financial stocks have lost $465 billion in market value so far as investors cut exposure to lenders from New York to Japan in the wake of Silicon Valley Bank’s collapse.

Losses widened early Tuesday, with the MSCI Asia Pacific Financials Index dropping as much as 2.7% to the lowest since Nov. 29. Mitsubishi UFJ Financial Group Inc. slid as much as 8.3% in Japan, while South Korea’s Hana Financial Group Inc. fell 4.7% and Australia’s ANZ Group Holdings Ltd. lost 2.8%.

The declines came after US peers tumbled, with investors questioning whether a government rescue plan for the banking system will prevent more fallout from SVB’s demise. Asian lenders have been seen as more insulated from direct risk.

The combined market capitalization of the MSCI World Financials Index and MSCI EM Financials Index has dropped about $465 billion in three days.

Major northern Asia banks mostly have “minimal risk of the sudden run on deposits that crumpled Silicon Valley Bank” given their solid deposits, asset mixes and liquidity, Bloomberg Intelligence analyst Francis Chan wrote in a note. “Smaller lenders may harbor liquidity and credit risks that could easily be overlooked.”

There are still concerns that financial firms could see an impact from their large investments in bonds and other financial instruments amid the SVB-induced turmoil. Two-year Treasury yields saw their largest one-day drop since the early 1980s on Monday amid expectations the Federal Reserve will hold off raising interest rates due to recent turmoil in the banking system.

“We need to assess the likelihood of an economic hard landing in the US and odds of a pivot on interest rates by the Fed,” said Michael Makdad, an analyst at Morningstar Inc. “If these things do not happen, today’s move in Japanese financial stocks looks like an overreaction to me.”