Asian stocks in Hong Kong (CNN) fell across the board was dragged down by bank stocks on Tuesday as fears over the fallout from the collapse of Silicon Valley Bank gripped the market, despite US government efforts to stabilize the financial system.
Japan’s Nikkei 225 (N225) fell 2.19% for its third consecutive day of declines. Hong Kong’s Hang Seng (HSI) briefly fell 2.5% before paring losses in the afternoon. Korea’s Kospi (KOSPI) lost nearly 3%. China’s Shanghai Composite (SHCOMP) lost 0.65%.
Banks were the hardest hit sector across the region.
HSBC Holdings (HBCYF) tumbled more than 5% in Hong Kong after the banking giant pledged to inject £2 billion ($2.4 billion) of liquidity into SVB’s UK unit, which it bought for £1 had. Standard Chartered Bank fell nearly 7%.
The sell-off came despite extraordinary action by US regulators over the weekend to avert a possible banking crisis following the SVB collapse. The California-based lender fell at an astonishing rate on Friday, marking America’s biggest bank shutdown since 2008.
Investors are now curious as to whether SVB’s demise could trigger a broader banking sector meltdown. On Monday, US stocks were mixed with bank stocks taking a hit.
“Investors are worried that significantly higher interest rates are leaving other financial institutions with significant unrealized losses on their balance sheets,” DBRS Morningstar analysts said Monday.
The fear is “fundamentally independent,” it said.
US Treasury yields were significantly lower on Monday as investors flocked to safe haven assets. The 2-year Treasury yield briefly fell more than 50 basis points, the largest daily decline in decades.
“Right now, markets are speculating on a Fed reversal but are also pricing in a greater degree of contagion from the banking sector turmoil, ultimately weighing on risk sentiment,” ING analysts wrote in a research note on Tuesday.
Should the Federal Reserve heed market hopes and end its cycle of rate hikes, there is ample room for market sentiment to recover, they said.
Other bank stocks in Asia Pacific also fell.
In Hong Kong, shares in Bank of China (Hong Kong) and Hang Seng Bank fell 3.7% and 1.3%, respectively. Pan-Asian insurer AIA Group fell 4.7%.
In Tokyo, Mitsubishi UFJ Financial Group, Japan’s largest bank, fell 8.4%. Sumitomo Mitsui Financial Group and Mizuho Financial Group both fell more than 7%.
In Seoul, KB Financial Group and Shinhan Financial Group fell 3.6% and 2.5%, respectively.
In Shanghai, China Merchants Bank fell 1.2% and China Minsheng Banking Corp fell 0.3%.
In Sydney, Macquarie Group lost 3.1% and ANZ Group 1.5%.