Asian shares ended lower after Switzerland's UBS seals deal to acquire Credit Suisse
- Asian shares ended lower on Monday after UBS struck a deal to acquire Credit Suisse.
- ING economists said a relief rally is possible after Switzerland moved to contain the banking crisis.
Asian shares are down on Monday after Switzerland's UBS struck a deal to take over peer Credit Suisse. The deal values Credit Suisse at around $3.25 billion.
The development in Europe came after a wild week for the banking sector — Silicon Valley Bank was shut down by regulators on March 10, spurring jitters of a contagion that could lead to a broader economic crisis.
Japan's Nikkei 225 closed 1.4% lower, while Shanghai Composite Index ended the day 0.5% lower. Korea's Kospi closed 0.7% lower, and Australia's ASX200 was down 1.4% for the day.
Hong Kong's Hang Seng Index fell much more sharply than other Asia Pacific indices — posting 2.7% in losses — but the index has been under pressure from China's slow economic recovery after the country lifted zero-Covid curbs in January.
S&P 500 futures were 0.7% lower at last check.
Bitcoin rose 4.3% over the past 24 hours and is now trading above $28,200, according to CoinMarketCap.
Hong Kong-listed shares of HSBC Holdings closed 6.2% lower while its British banking peer Standard Chartered dropped by 7.3%.
HSBC and Standard Chartered continued to come under pressure on the London Stock Exchange later in the global day, falling 3.2% and 4.3% respectively at last check. Other major European banks shares also slumped early in the trading day with Deutsche Bank down 6.7% and Societe Generale down 5.2%.
Additional tier 1, or AT1, bonds of some Asian banks were also down on Monday morning, after the Swiss Financial Market Supervisory Authority said there will be a "complete write-down" on Credit Suisse's AT1 bonds to "boost capital" in the newly merged bank. The write-down will cost 16 billion Swiss francs, or $17 billion, according to the regulator.
The 5.825% perpetual dollar note issued by Hong Kong's Bank of East Asia was down by 8.6 cents to just under 80 cents, while the 4% perpetual note issued by Thailand's Kasikornbank dropped 4.3 cents, also to just under 80 cents, per Bloomberg. The losses would be the largest ever for these issuances if they are maintained over the trading day.
AT1 bonds were created after the Global Financial Crisis of 2007 to 2009 to pass the risks from crises onto investors rather than onto taxpayers.
Analysts are keenly watching the Fed's interest rate decision later this week
The markets could rise on relief that Switzerland moved to prevent the banking crisis from spreading over the weekend, ING economists Robert Carnell and Iris Pang said in a note on Monday seen by Insider.
Investors will also be keenly watching the Federal Reserve's interest rate decision for further cues, per the ING economists. The Fed is set to meet on Tuesday and Wednesday. The central bank's decision is keenly watched, as a year of aggressive interest rate hikes has dampened the stock markets.
"Initial reaction for the financial banks in the region to the UBS' buyout of Credit Suisse seems to point to more measured gains, suggesting a still-cautious environment as sentiments remain on hold for further developments in the banking space," wrote Yeap Jun Rong, a market strategist at IG, an online trading platform in a Monday note.
'Business as usual' for Credit Suisse in Hong Kong, Singapore
Hong Kong and Singapore regulators say Credit Suisse is conducting business as usual on Monday.
The Hong Kong Monetary Authority, or HKMA, said in a Monday statement the bank's operations in the city will "open for business today as usual" and customers can access their deposits.
Credit Suisse's Hong Kong branch holds about HK$100 billion, or $12.7 billion, in assets — less than 0.5% total assets in the city's banking sector, per HKMA.
The Monetary Authority of Singapore said Monday Credit Suisse will continue operating in the country "with no interruptions or restrictions."
The bank's customers "continue to have full access to their accounts and CS' contracts with counterparties remain in force," the Singapore authority added.
March 20, 2022, 12.05 p.m. SGT: This story has been updated to reflect the price movement in the AT1 bonds of some Asian banks.
March 20, 2022, 3.06p.m. SGT: This story has been updated to reflect price movements in the various Asia Pacific exchanges.
March 20, 2022, 5.02p.m. SGT: This story has been updated to reflect price movements in the various Asia Pacific exchanges, and price movements of bank stocks in various European exchanges.
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