Asian markets open lower after UBS agrees to buy Credit Suisse

Asian stocks mostly opened lower on Monday as traders assessed the impact of a government-brokered takeover of Credit Suisse and turmoil in the global banking sector.

Japan’s Topix shed 0.9 per cent in morning trading, while South Korea’s Kospi fell 0.2 per cent. Hong Kong’s Hang Seng index declined 1.8 per cent, and China’s CSI 300 gained 0.5 per cent.

The collapse of three US banks triggered turmoil in financial markets last week. Over the weekend, regulators engineered a takeover of 167-year-old Credit Suisse. The bank has reeled under a series of scandals and buckled under the pressures of the banking sector crisis.

Japanese banking stocks incurred steep losses last week as markets digested the collapse of technology-focused lenders Silicon Valley Bank and Signature Bank. On Monday, the Topix Banks was down 1 per cent.

Shares in Japan’s three major banking groups — Mitsubishi UFJ Financial Group, Mizuho and Sumitomo Mitsui Financial Group — all logged small gains at the open but reversed them later in the morning. Traders said investor concerns around the vulnerability of the largest Japanese banks appeared to have subsided for now.

Investors who had built significant short positions in the large Japanese banks were covering those positions on Monday morning, said one trader.

Swiss regulators brokered a deal for UBS to purchase Credit Suisse for $3.25bn in a bid to prevent a crisis from spreading across the global financial system.

As part of the deal, Finma, the Swiss financial regulator, ordered that SFr16bn ($17.3bn) of the bank’s additional tier one (AT1) bonds, a riskier form of bank debt, would be written down to zero, in a move that is expected to cause ructions in European debt markets when they open.

The move appeared to have taken markets by surprise, with larger losses forced on bondholders than on shareholders of Credit Suisse.

AT1s are usually owned by professional bond investors and hedge funds but are also popular among retail and wealth management investors in Asia.

US futures pointed higher on Monday following news of the deal, with contracts for the S&P 500 and Nasdaq 100 up 0.7 per cent and 0.5 per cent, respectively.

The yen, which began climbing against the dollar last week on speculation around the falling likelihood of further US Fed rate increases, traded quietly in early Monday trading, falling 0.3 per cent to ¥132.21 per dollar.