Asia-Pacific markets fall on bank fears, Credit Suisse announces ‘decisive action’ to borrow

New Zealand’s gross domestic product fell 0.6% in the quarter ending December 2022, a reversal from a 1.7 % rise in the previous quarter.

For the full year of 2022, GDP expanded by 2.2%, down from the 6% recorded for the whole of 2021.

Out of 16 industries, only five recorded an increase in activity compared to the quarter before.

Manufacturing was the biggest driver of the decrease, down 1.9%.

— Lim Hui Jie

The Swiss franc saw continued volatility following developments around Credit Suisse – and last strengthened 0.17% against the U.S. dollar to pare earlier weakening after the lender announced to borrow nearly $54 billion from Swiss National Bank.

The Japanese yen also saw further strengthening to trade at 132.86 against the greenback. The Korean won strengthened 0.13% to 1,311.24 against the U.S. dollar.

– Jihye Lee

Credit Suisse announced it will be borrowing up to 50 billion Swiss francs ($53.69 billion) from the Swiss National Bank under a covered loan facility and a short-term liquidity facility.

The steps will “support Credit Suisse’s core businesses and clients as Credit Suisse takes the necessary steps to create a simpler and more focused bank built around client needs,” the company said in an announcement.

In addition, the bank is making a cash tender offer in relation to ten U.S. dollar denominated senior debt securities for an aggregate consideration of up to $2.5 billion – as well as a separate offer to four Euro denominated senior debt securities for up to an aggregate 500 million euros, the company said.

Read more here.

– Jihye Lee

Banks in South Korea and Australia have reversed earlier losses after Swiss lender Credit Suisse announced liquidity measures to assuage investor fears.

The Commonwealth Bank of Australia pared most of its losses in volatile trading – it traded 0.15% lower after falling as much as 1.97% earlier.

Westpac Banking and National Australia Bank fell as much as 2.35% and 1.81% respectively before erasing some of its declines and last fell 1.34% and 0.58% lower.

Some South Korean banks fell as much as 2% earlier – Woori Financial Group last fell 1.62%, Shinhan Finance traded 1.69% lower and KB Kookmin Bank slumped 1.12%.

— Lim Hui Jie

Japan banks pared some losses slightly Thursday morning after Credit Suisse announced it will ‘pre-emptively strengthen its liquidity’ position by borrowing CHF50 billion ($54 billion) from Swiss National Bank, as well as issue a public tender for CHF 3 billion worth of bonds.

Before the announcement, shares of MUFG shed over 5% and was the top loser on the Topix, but have narrowed to just 3.35% loss, while Sumitomo Mitsui Financial Group slid 5% and have since pared back to a 3.59% drop.

The Topix as a whole was lower over 2% prior to the announcement, but is now down slightly at 1.4%.

— Lim Hui Jie

Australia’s unemployment rate fell slightly from 3.7% in January to 3.5% in February, seasonally adjusted government data showed.

That was lower than expectations to see an unemployment rate of 3.6%, according to a Reuters poll.

The economy’s labor participation rate was in line with expectations at 66.6%, an increase from 66.5% seen in the previous month.

The Australian dollar slightly strengthened by 0.23% to 0.6630 against the U.S. dollar.

– Jihye Lee

Japan’s trade deficit has widened to 897.7 billion yen ($6.76 million) in February, up 26.2% compared to the same period a year ago.

According to government data, exports in February came in 6.5% higher, while imports grew 8.3%. These were lower than forecasts put forward by economists, who expected export and import growth of 7.1% and 12.2% respectively.

Notably, Japan’s exports to Europe and the U.S. grew 18.6% and 14.9% respectively on an annualized basis, while exports to China dipped 10.9%.

— Lim Hui Jie

Japan’s shunto wage negotiations concluded Wednesday, Reuters reported – marking the biggest pay rises not seen in decades as inflation levels rise.

Analysts polled by Reuters expected to see a boost of roughly 3% in overall wages for the economy, marking the largest increment since 1997.

Prime Minister Fumio Kishida has called for better pay for workers in Japan, citing a weakened currency and higher levels of commodity prices leading to raised import costs in an overall high inflation environment, the report said.

– Jihye Lee

First Republic Bank is considering options to shore up liquidity including a sale of the lender, Bloomberg reported, citing people with knowledge of the matter.

The bank is expected to draw interest from its rivals and no decision has been made, the report said.

Shares of the bank rose 3.92% in after hour trading in U.S. Wednesday evening – after seeing a rise of more than 20% earlier in the week alongside regional banks.

– Jihye Lee

Goldman Sachs on Wednesday lowered its 2023 economic growth forecast by 0.3 percentage points to 1.2%, citing a pullback in lending from small- and medium-sized banks amid turmoil in the broader financial system. 

Analysts expect that small banks will attempt to preserve liquidity in case they need to meet depositor withdrawals, leading to a substantial tightening in bank lending standards that could weigh on aggregate demand. “Small and medium-sized banks play an important role in the US economy,” they wrote.

Banks with less than $250 billion in assets comprise about 50% of U.S. commercial and industrial lending, the firm noted. Click here to read more.

— Pia Singh

The Swiss National Bank said Wednesday that it will provide banking giant Credit Suisse with liquidity if needed.

In a joint statement, the SNB and Swiss Financial Market Supervisory Authority said: “FINMA confirms that Credit Suisse meets the higher capital and liquidity requirements applicable to systemically important banks. In addition, the SNB will provide liquidity to the globally active bank if necessary.”

Credit Suisse shares were under pressure Wednesday after the bank’s largest investor said it wouldn’t provide more financial assistance. U.S.-listed shares of Credit Suisse were last down more than 18%.

— Fred Imbert

Credit Suisse shares fell more than 23% in heavy volume as the market opened. Shares sank to a fresh all-time low of $1.75.

Troubles at the Swiss bank have reignited the turmoil among financial stocks, with pressure especially acute for mid-size U.S. banks. The bank’s largest investor, Saudi National Bank, said it can’t provide the company with further financial assistance.

—Christina Cheddar Berk

ADR shares of Swiss lender Credit Suisse tumbled 21% in premarket trading.

Saudi National Bank said it could not provide more funding, Reuters reported. “We cannot because we would go above 10%. It’s a regulatory issue,” Saudi National Bank Chairman Ammar Al Khudairy told Reuters Wednesday.

The troubled Swiss bank said earlier this week it had found “material weaknesses” in its financial reporting for 2022 and 2021.

— John Melloy

Several European banking names were halted Wednesday, as a sharp drop in Credit Suisse shares dragged down the sector — along with the broader market.

Shares of Societe Generale, along with Italy’s Monte dei Paschi and UniCredit, have been halted. Credit Suisse, meanwhile, fell 20% after its largest investor said it would not provide further assistance for the embattled bank.

These moves come as traders around the world grapple with the fallout from Silicon Valley Bank’s failure.

“The failure of Silicon Valley Bank has spilled into the European equity market,” wrote Citi strategist Beata Manthey. “While US authorities have stepped in to limit contagion risks, ongoing volatility in bank shares means broader spillovers may still be in play.”

Manthey noted that conditions were already ripe for profit taking in European markets. “However, investors remain net long on European Banks, despite cutting their position from max longs only one month ago. This means positioning could still unwind further.”

— Fred Imbert, Michael Bloom