Asian stocks fall as Credit Suisse adds to bank fears

Asian equities fell on Thursday morning, following the US and Europe lower as turmoil at Credit Suisse triggered renewed selling in the banking sector.

Japan’s Topix shed 1.3 per cent, South Korea’s Kospi lost 0.1 per cent and Australia’s S&P/ASX 200 fell 1.5 per cent. Hong Kong’s Hang Seng and China’s CSI 300 shed 1.3 per cent and 0.5 per cent, respectively.

Shares of Japanese banks resumed a sell-off, with the Topix Banks index down 3.7 per cent. Regional lenders Tochigi Bank and Keiyo Bank were hit the hardest, losing 5.4 per cent and 3.6 per cent, respectively.

Investors on Wall Street restarted selling bank shares on Wednesday, after a plunge in the value of equity and bonds at troubled lender Credit Suisse refocused investor fears about the bond portfolios of lenders worldwide.

Those losses came despite gains on Tuesday, as fears over contagion from the collapse of technology-focused lender Silicon Valley Bank receded.

The S&P 500 closed down 0.7 per cent, while the Nasdaq Composite finished flat on Wednesday. JPMorgan Chase, the world’s largest bank by assets, fell 4.7 per cent, while Morgan Stanley and Citibank both lost more than 5 per cent. The KBW Nasdaq Bank index closed 3.6 per cent lower.

San Francisco-based First Republic Bank, which has been hit hardest by the fallout from SVB’s collapse, lost 21.4 per cent.

Credit Suisse then announced on Thursday it would borrow up to $54bn from the Swiss central bank and buy back about $3bn of its debt, in a bid to halt a crisis enveloping the bank, whose shares closed 24.2 per cent lower on Wednesday.

European markets reacted positively to the news, with futures contracts for the Euro Stoxx 50 and FTSE 100 up 2.2 per cent and 1.2 per cent, respectively. Contracts for Wall Street’s S&P 500 added 0.5 per cent.

The yield on two-year US Treasury notes, which is closely linked to interest rate expectations, rose 0.02 percentage points to 3.99 per cent on Thursday during Asian trading, after a decline of 0.31 percentage points the day before. The yield on the 10-year note also jumped 0.02 percentage points to 3.51 per cent. Yields move inversely to prices.

The turmoil in the banking sector had breathed fresh life into expectations that the US Federal Reserve would have to change step and relax its aggressive strategy of interest rate rises.