The collapse of SVB should have limited implications for Asia, although it could influence the Fed’s rate decision in March. It also highlights the risk that the Fed’s rate hiking cycle would ultimately surface fragilities within the global economy, reinforcing our investment teams’ continued focus on quality profits and cashflows.

The collapse of Silicon Valley Bank (SVB), a leading lender for the tech start-up community in the US, and the subsequent closure of New York-based Signature bank have caused a sharp sell-off among the US regional banking stocks. US and European global banks were also affected, albeit to a more limited extent. With SVB’s woes stemming from a USD1.8 bn loss on the sale of a portfolio of securities, investor concerns have risen over the value of banks’ bond portfolios. The impact on Asian markets has been relatively muted.


US banking system. The systemic threat to the US banking system should be limited. The US regulators have responded swiftly to prevent any contagion risks to the US financial system:

  • All depositors of SVB and Signature will be able to access their money on Monday (13 March), which should help keep depositors’ faith in the banks in general
  • Agreed emergency funding will allow any federally insured depository institution (including banks, savings associations or credit unions) to borrow against its held to maturity assets. These institutions can place these assets with the Federal Reserve Banks and borrow an amount based on the asset being priced at Par
  • The issue with Mark to Market for the held to maturity assets is a liquidity problem, not a solvency one. This mechanism immediately reduces the risk of a bank run where the Federal Reserve Banks are in effect backstopping all deposits in the US banking system by ensuring the liquidity problem is solved.

    Furthermore, US banks that have been identified as systemically important financial institutions (SIFIs) have formidable capital buffers. These buffers have shielded them from the declines in the value of their held-to-maturity securities portfolios which have already been reflected on their balance sheets at the end of 2022.

    Fed rate decision. The recent market developments have lowered the likelihood of a 50bp rate hike at the 21-22 March FOMC meeting. We believe that the odds are now split between a 25bp hike or a temporary pause. That said, barring any systemic contagion, jobs and inflation data will continue to dominate the Fed’s interest rate decision over the longer term.

    Asian banks. It was reported that due to weak loan demand, SVB’s investment portfolio made up 57% of its total assets, a level that was significantly higher than other major US banks. This made it particularly vulnerable to a fall in the value of its securities’ portfolio. With the 20 largest banks in Asia Pacific having an average loan to deposit ratio of 75%1, securities should make up a much smaller share of assets.

    Asian tech sector. While there has been some knock-on impact on the US tech sector, the impact on the listed Asian tech sector is likely to be far more modest given the limited reliance on SVB for funding.

    We believe that this is a short-term market event which is unlikely to impact our long-term investment process. It should be expected that the Fed’s rate hiking cycle, which started about a year ago, would surface fragilities within the global economy. We had highlighted this risk in our 2023 Market Outlook and our investment teams continue to focus on companies and sectors that produce strong cashflows.

    Interesting reads

    Know more
    6 điều nhà đầu tư cần biết về năm 2024

    in insights

    6 điều nhà đầu tư cần biết về năm 2024

    29 Thg1

    Quan điểm của chúng tôi về việc cắt giảm lãi suất, trái ...

    Nhận định thị trường tháng 1

    in insights

    Triển vọng

    Nhận định thị trường tháng 1

    24 Thg1

    Thị trường cổ phiếu thế giới tăng vào tháng 12 năm 2023, trong khi ...

    Sức mạnh của rùa: Tại sao chậm mà chắc luôn chiến thắng trong cuộc đua đầu tư

    in insights

    Định lượng

    Sức mạnh của rùa: Tại sao chậm mà chắc luôn chiến thắng trong cuộc đua đầu tư

    17 Thg1

    Chiến lược đầu tư biến động thấp giúp danh mục đầu tư ổn định qua thời gian…

    Đánh giá thị trường tháng 12

    in insights

    Triển vọng

    Đánh giá thị trường tháng 12

    15 Thg12

    Chứng khoán toàn cầu phục hồi trong tháng 11 trong bối cảnh ...

    1As of 30 June 2022. Sample limited to the 20 largest Asia-Pacific banks in S&P Global Market Intelligence by total assets as of 30 June 2022. Loans/deposits ratio is calculated using total net loans and total deposits.

    This document is produced by Eastspring Investments (Singapore) Limited and issued in:

    Singapore by Eastspring Investments (Singapore) Limited (UEN: 199407631H)

    Australia (for wholesale clients only) by Eastspring Investments (Singapore) Limited (UEN: 199407631H), which is incorporated in Singapore, is exempt from the requirement to hold an Australian financial services licence and is licensed and regulated by the Monetary Authority of Singapore under Singapore laws which differ from Australian laws

    Hong Kong by Eastspring Investments (Hong Kong) Limited and has not been reviewed by the Securities and Futures Commission of Hong Kong.

    Indonesia by PT Eastspring Investments Indonesia, an investment manager that is licensed, registered and supervised by the Indonesia Financial Services Authority (OJK).

    Malaysia by Eastspring Investments Berhad (531241-U).

    Thailand by Eastspring Asset Management (Thailand) Co., Ltd.

    United States of America (for institutional clients only) by Eastspring Investments (Singapore) Limited (UEN: 199407631H), which is incorporated in Singapore and is registered with the U.S Securities and Exchange Commission as a registered investment adviser.

    European Economic Area (for professional clients only) and Switzerland (for qualified investors only) by Eastspring Investments (Luxembourg) S.A., 26, Boulevard Royal, 2449 Luxembourg, Grand-Duchy of Luxembourg, registered with the Registre de Commerce et des Sociétés (Luxembourg), Register No B 173737.

    United Kingdom (for professional clients only) by Eastspring Investments (Luxembourg) S.A. - UK Branch, 10 Lower Thames Street, London EC3R 6AF.

    Chile (for institutional clients only) by Eastspring Investments (Singapore) Limited (UEN: 199407631H), which is incorporated in Singapore and is licensed and regulated by the Monetary Authority of Singapore under Singapore laws which differ from Chilean laws.

    The afore-mentioned entities are hereinafter collectively referred to as Eastspring Investments.

    The views and opinions contained herein are those of the author, and may not necessarily represent views expressed or reflected in other Eastspring Investments’ communications. This document is solely for information purposes and does not have any regard to the specific investment objective, financial situation and/or particular needs of any specific persons who may receive this document. This document is not intended as an offer, a solicitation of offer or a recommendation, to deal in shares of securities or any financial instruments. It may not be published, circulated, reproduced or distributed without the prior written consent of Eastspring Investments. Reliance upon information in this document is at the sole discretion of the reader. Please carefully study the related information and/or consult your own professional adviser before investing.

    Investment involves risks. Past performance of and the predictions, projections, or forecasts on the economy, securities markets or the economic trends of the markets are not necessarily indicative of the future or likely performance of Eastspring Investments or any of the funds managed by Eastspring Investments.

    Information herein is believed to be reliable at time of publication. Data from third party sources may have been used in the preparation of this material and Eastspring Investments has not independently verified, validated or audited such data. Where lawfully permitted, Eastspring Investments does not warrant its completeness or accuracy and is not responsible for error of facts or opinion nor shall be liable for damages arising out of any person’s reliance upon this information. Any opinion or estimate contained in this document may subject to change without notice.

    Eastspring Investments companies (excluding joint venture companies) are ultimately wholly owned/indirect subsidiaries of Prudential plc of the United Kingdom. Eastspring Investments companies (including joint venture companies) and Prudential plc are not affiliated in any manner with Prudential Financial, Inc., a company whose principal place of business is in the United States of America or with the Prudential Assurance Company Limited, a subsidiary of M&G plc (a company incorporated in the United Kingdom).