Benchmark Asia-Pacific erases all 2023 gains

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The leading Asia-Pacific index erased its year-on-year gains and is now flat for 2023, as bank shares fell on Tuesday.

The MSCI Asia Pacific index hit a low of 155.44 in afternoon trade, down more than 9% from 171.26 on Feb. 2 and erasing its gains for the year. On the last trading day of 2022, the index closed at 155.74 points.

In January, the index entered a bull market for the second trading week of the year, fueled by optimism over China’s reopening.

MSCI’s broadest index of Asia-Pacific shares outside Japan, meanwhile, traded 1.47% lower on Tuesday afternoon, also marking a new low for the year. Last month, traders saw a chance for the index to move higher despite short-term volatility.

Markets continued to suffer steep losses on Tuesday amid worries about the fallout from Silicon Valley Bank’s collapse, even after US regulators cracked down on depositors over the weekend.

“Concerns of a global economic downturn continue to put pressure on the region, which is more focused on values,” IG analyst Yeap Jun Rong said in a note on Tuesday.

Bank shares in Japan fell sharply on Tuesday, weighing on the broader Topix, which led to a sell-off in the Asia-Pacific region. The index closed 2.7% lower as financials fell 4.65%, Refinitiv data showed.

Shares in Tokyo-listed Mitsubishi UFJ Financial Group fell 8.59%, Sumitomo Mitsui Financial Group fell 7.57% and Mizuho Financial Group shed 7.14%. Tech giant SoftBank Group also saw a loss of more than 4%.

Yeap also noted indicators such as Straits Times Index About 45% of its weight in Singapore is in banking stocks. the shares of DBS:, United Overseas Bank and: Foreign-Chinese Banking Corporation led to a decline on Tuesday.

The Monetary Authority of Singapore said on Monday that its exposure to failed US banks was “insignificant”.

“Singapore banks are well capitalized and regularly stress-test against interest rate and other risks,” the report said, adding that their liquidity positions are healthy and backed by a “stable and diversified funding base”.

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Nomura’s equity strategists, including Chetan Seth, reiterated their February call and still expect more gains for the index.

The strategists wrote in a post on Monday. “While we don’t think there’s any significant impact on Asian stocks from the US banking sector woes, there’s always the risk of some ‘skeletons coming out of the closet.’

“We tend to think that these problems will not be systemic to the health of the banking sector,” he said.

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“Special Situation”

Frank Benzimra, head of Asia equity strategy at Societe Generale, said the rise in systemic risk was widely seen as part of a pattern at the end of the Fed cycle.

“When inflation increases, the first-order effect is high rates, the second is an increase in systemic risk. The SVB episode is part of this framework,” he said, adding that threats to financial stability “usually occur at the last stage. The Fed Cycle.”

“So SVB is in a very special situation in terms of its funding, not subject to coverage and funding ratios (LCR/NSFR rules), and MBS/UST portfolios are available for sale,” he said.

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