Hong Kong stocks tumbled as the turmoil surrounding Credit Suisse and bank failures including Silicon Valley Bank infected markets in Asia-Pacific. Investors turned cautious amid conflicting bets on the US rate outlook. Baidu slumped after it unveiled a ChatGPT-like bot to disappointment.
The Hang Seng Index fell 1.7 per cent to 19,203.91 closing of Thursday trading, the lowest since December 21. The Tech Index declined 1.4 per cent while the Shanghai Composite Index retreated 1.2 per cent.
Banks and insurers led losses. HSBC slipped 2.4 per cent to HK$53.90, while its subsidiary Hang Seng Bank declined 2 per cent to HK$115.60 and Bank of China (Hong Kong) slumped 3.9 per cent to HK$24.90. AIA Group lost 5.1 per cent to HK$76.40 and peer Ping An Insurance slid 3.3 per cent to HK$50.50.
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Most Asia-Pacific markets weakened. Japan's Nikkei dropped 0.8 per cent, Australia's ASX S&P 200 fell 1.5 per cent and South Korea's Kospi slipped 0.1 per cent.
Credit Suisse said it will borrow as much as 50 billion Swiss francs (US$53.7 billion) from Swiss National Bank to pre-emptively boost its liquidity and buy back some of its dollar- and euro-denominated bonds from investors. The move increased its chances of survival, after a confidence crisis sent its stock to a record-low in Zurich and drove default insurance costs to distressed levels.
"The liquidity for Credit Suisse may not have much beneficial impact for Hong Kong, as it does little to stem the fear of a banking rout," said Brock Silvers, chief investment officer at Kaiyuan Capital in Hong Kong. "Banks continue to be worrisome, US inflation seems stickier than hoped for, while China's post-Covid recovery may fail to meet expectations."
Stresses in the banking sector this month have prompted rate traders to rein in bets on a 50-basis point hike by the Federal Reserve at its March 21-22 policy meeting. While Goldman Sachs called for a pause, there is still more than an even chance of a quarter-point rise according to Fed fund futures.
"Markets could get messy amid the fallout from Silicon Valley Bank's collapse," said Marty Dropkin, head of equities in Asia Pacific at Fidelity International. At the same time, "persistently sticky inflation and hot labour markets [are] forcing market participants to change their outlook on the path of interest rates," he added.
Elsewhere, Baidu sank 6.4 per cent to HK$125.10 for its bigget sell-off since TK. China's biggest search-engine operator unveiled Ernie, a rival to ChatGPT app, with no live preview and CEO Robin Li spoke via a pre-recorded video.
Other Chinese tech stocks also weakened amid signs the US-China tech war is worsening, with Tencent losing 2.5 per cent to HK$336 and chip maker Shanghai Fudan Microelectronics dropping 1.9 per cent to HK$31.65 and Hua Hong Semiconductor fell 3.3 per cent to HK$31.80.
Some directors, including two US citizens, resigned from chip-equipment maker Advanced Micro-Fabrication Equipment, months after the Biden administration restricted US persons from helping to develop China's chip industry.
Elsewhere, textile manufacturer Zhejiang Cady Industry surged 44 per cent to 28.58 yuan on its first day of trading in Shanghai.
This article originally appeared in the South China Morning Post (SCMP), the most authoritative voice reporting on China and Asia for more than a century. For more SCMP stories, please explore the SCMP app or visit the SCMP's Facebook and Twitter pages. Copyright © 2023 South China Morning Post Publishers Ltd. All rights reserved.
Copyright (c) 2023. South China Morning Post Publishers Ltd. All rights reserved.