Hong Kong's largest bank, HSBC Holdings (HK:0005) (HSBC) , suffered in Asian trade on Monday, with its shares selling off 6.2% by the close as investors fret about its exposure to Credit Suisse (CS) . The bank, with a London headquarters but its profit center in Asia, was the biggest loser in the Hang Seng Index, dragging the Hong Kong benchmark down 2.7% for the day.
Standard Chartered (HK:2888) (SCBFY) is not in the Hang Seng but also saw heavy selling. Another London-based bank with a cross-listing, its Hong Kong shares dropped 7.3%.
Most other Asian markets moved lower following Sunday's announcement from Swiss banking authorities that rival UBS (UBS) will take over Credit Suisse, in a share swap worth US$3.25 billion. But the losses in Asia are contained, certainly not reflecting panic selling.
Regulators in Hong Kong and Singapore, where Credit Suisse operates, said on Monday that customers are able to access their funds at the bank, and business continues as usual both for the Swiss bank and the local banking system in those cities.
Despite its likely management reshuffle, Credit Suisse is going ahead with its Asian Investment Conference in Hong Kong that starts Tuesday and runs through Thursday. It's the first time in four years that the conference will take place in person, with its flagship Asian event at the Conrad Hotel captioned "Embracing reality," after three years in the virtual world. "The uncertainty that defined 2022 will continue to weigh on growth in 2023," the bank says in advance, presciently.
Asian investors are responding to concerns about expanding problems in the global financial system. But they're reassured by moves, so far swift, by regulators to backstop any losses while the direct banking exposure appears to be limited in Asia.
In Tokyo, the broad-market Topix ended Monday down 1.5%, while the industrials-heavy Nikkei 225 lost 1.4%. Japanese markets will be closed on Tuesday for the vernal equinox.
Japan's big banks have been suffering since the failure of Silicon Valley Bank 10 days ago. Japanese banks often have large holdings of government bonds, the products that caused such problems for SVB when their value declined.
On Monday, investment bank Nomura Holdings (T:8604) (NMR) led the losses, down 2.5%, as institutions that focus on capital markets suffered worse than banks that also have consumer arms. Mizuho Financial Group (T:8411) (MFG) ended the day down 2.3%, while Mitsubishi UFJ Financial Group (T:8306) (MUFG) saw a 1.8% decline. Sumitomo Mitsui Financial Group (T:8316) (SMFG) finished Monday down 1.7%.
Local economic conditions appear positive in Japan. Wage negotiations have been going well in Japan, as I indicated on Friday. The Japanese Trade Union Confederation has issued the outcome of the first round of spring 2023 wage talks, indicating unions and employers have negotiated a 3.99% wage increase, 2.33% on base pay. Japan's central bank is waiting for signs of sustained wage gains before it says it will shift away from its super-easy monetary policy.
Mainland Chinese stocks started Monday with a rare move higher, thanks to the light hand of the central bank, although the optimism faded during the day. The CSI 300 index of the largest listings in Shanghai and Shenzhen was up 0.1% in early-afternoon trade but finished with a 0.5% decline.
The central People's Bank of China on Monday opted to keep its one-year and five-year loan prime rates steady for the seventh straight month, as expected. More surprising was that the Chinese central bank on Friday supported the banking sector by cutting the reserve requirement ratio of cash that banks must keep on hand by 25 basis points, effective March 27. That's a policy stance that is "supportive yet restrained," Nomura notes, estimating it will free up just over C¥500 billion (US$73 billion) in funds for lending.
Australian shares closed down 1.4% in the form of the S&P/ASX 200 Index. But it is mining and commodity stocks that caused much of the decline, the other main driver of the Aussie market besides its financials.
When it comes to Aussie financial stocks, Macquarie Group (ASX:MQG) (MQBKY) is the main mover, with a lurch lower to the tune of 4.6%. It is primarily an investment bank with international exposure, and therefore both more exposed to any weakness in the West revealed by Credit Suisse. Macquarie also has less of a fallback in the form of domestic Aussie consumer-banking operations.
The Big Four banks moved a little lower. National Australia Bank (ASX:NAB) (NABZY) finished the Sydney day down 1.5%, ANZ Group Holdings (ASX:ANZ) (ANZGY) ended trade down 1.4%, Westpac Banking (ASX:WBC) (WBK) was down 0.6% and Commonwealth Bank (ASX:CBA) (CMWAY) lost 0.4%.
Geopolitics is the predominant focus for Asia, with Chinese President Xi Jinping beginning a state visit in Moscow during which he'll meet with his Russian counterpart, Vladimir Putin. It's a reaffirmation of the "no limits" alliance between Russia and China, and a show of support -- despite China's claims that it is neutral and attempting to broker a peace deal with Ukraine -- for Putin after the International Criminal Court issued a warrant for his arrest on war-crimes charges.
Besides then-Sudan President Omar al-Bashir and Libyan dictator Muammar Gaddafi, Putin is only the third head of state to face ICC charges while in power. Although major nations such as India, China and the United States are not members of the ICC, Putin faces arrest if he steps foot in the 123 member nations, including all European Union countries, Australia, Brazil, Britain, Canada, Japan and Mexico.
Japanese Prime Minister Fumio Kishida, currently serving as president of the G7 nations, is due today to meet with Indian Prime Minister Narendra Modi in New Delhi. They're sure to address their participation in the "Quad" grouping of Asia Pacific democracies that also includes the United States and Australia.
Singapore, the Southeast Asian financial center, is the largest loser in that region, with the Straits Times down 1.7% just before the close. The Thai and Indonesian markets both lost 1.0% but the declines in other East Asian markets and Southeast Asian markets were muted.
In South Korea, the Kospi lost 0.7%, and the Taiex in Taiwan was only slightly in the red, off 0.2%. Malaysian stocks declined 0.6%.
For now, any fallout from the financial weakness in the West appears contained there. Much like the Global Financial Crisis, we have been insulated in Asia by stronger economic conditions and the legacy of the Asian Financial Crisis, which led regulators to propose much-stricter limits on leverage that have stood Asian banks well during times of crisis.