Asian equities fall after sell-off in US bank shares

Asian equities followed the US sharply lower on Friday, after investors on Wall Street sold off stocks over concerns about the health of the US banking sector.

Hong Kong’s Hang Seng index was down 2.2 per cent, China’s CSI 300 shed 1 per cent, South Korea’s Kospi declined 1.1 per cent and Japan’s Topix lost 1.8 per cent.

US Treasuries gained, with the yield on the 10-year note, which moves inversely to price, declining 0.09 percentage points to 3.83 per cent, after dropping 5 basis points the day before.

“There’s been a sell-off in Wall Street markets mainly driven by the banks, and what you’re seeing is the ripple effect of that in Asia markets, especially Hong Kong”, said Dickie Wong, executive director of research at Kingston Securities in Hong Kong.

Wong added that worse than expected earnings from JD.com, the Chinese ecommerce company which said on Thursday its revenue growth had slowed at the end of last year, also led to a sell-off in parts of the tech sector.

The moves followed a steep sell-off on Wall Street on Thursday as investors were spooked by difficulties at Silicon Valley Bank, a technology-focused lender.

The bank’s shares fell 60 per cent on Thursday after it launched a $2.25bn share sale to shore up its balance sheet. SVB said on Wednesday that it had lost about $1.8bn when it offloaded securities valued at $21bn.

The losses have raised concerns about the potential risks in the large portfolios of bonds held by US banks, which invested deposits into long-dated securities such as Treasuries during the pandemic.

The turbulence at Silicon Valley Bank came after Silvergate, the San Diego-based go-to lender for the crypto sector, on Wednesday announced a “voluntary liquidation” following turmoil in digital asset markets.

The S&P 500’s financial sub-index lost 3.9 per cent on Thursday, while the market value of the four biggest US banks by assets declined by $52.4bn.

European futures also pointed lower on Friday, with contracts for the FTSE 100 and Euro Stoxx 50 down 1.3 per cent and 1.6 per cent, respectively.

Elsewhere in markets, the yen declined 0.3 per cent to trade at ¥136.59 against the dollar, after the Bank of Japan maintained the ultra-loose monetary policy overseen by outgoing governor Haruhiko Kuroda for the past decade.

Following Kuroda’s final policy board meeting, the BoJ kept overnight interest rates on hold at minus 0.1 per cent. It said it would continue to allow 10-year bond yields to fluctuate by 0.5 percentage points above or below its target yield of zero.

Additional reporting by Kana Inagaki in Tokyo and Kaye Wiggins in Hong Kong