Asian stocks plummet as U.S. bank rout spills over

By Ambar Warrick

Investing.com -- Asian markets tumbled on Tuesday as investors sharply cut their exposure to bank stocks amid fears of contagion from a brewing crisis in the U.S., while uncertainty over monetary policy also weighed ahead of key U.S. inflation data.

Japan’s Nikkei 225 index was hit the hardest in Asia, slumping over 2% as markets feared increased exposure to U.S. bonds among Japanese financial firms. Resona Holdings, Inc. (TYO:8308), T&D Holdings, Inc. (TYO:8795) and Concordia Financial Group Ltd (TYO:7186) slumped between 7% and 9%, and were the worst performers on the Nikkei.

Other bank-heavy indexes also logged heavy losses, with South Korea’s KOSPI down nearly 2%, while Indonesia’s Jakarta Stock Exchange Composite Index led losses across Southeast Asia with a 1.6% dip.

China’s Shanghai Shenzhen CSI 300 and Shanghai Composite indexes lost 0.8% each, while Hong Kong’s Hang Seng index slid 1.8% as optimism over more government stimulus measures was largely offset by heavy selling in local bank stocks.

U.S. bank stocks plummeted in overnight trade as investors feared more ructions in the bank sector after the collapse of Silicon Valley Bank (NASDAQ:SIVB) last week. Losses in bank stocks persisted even as the government intervened in the sector with emergency liquidity and reassurances of support.

The bank rout also spurred increased bets that the Federal Reserve will soften its hawkish stance to prevent further economic damage.

Focus is now on U.S. consumer price index inflation data, due later in the day, for more cues on how the central bank could potentially proceed with monetary policy. Fed Fund futures prices show that markets have abandoned bets on a 50 basis point hike by the Fed next week, with a majority of traders now positioning for a 25 bps raise.

Any signs of overheated inflation, coupled with ructions in the banking sector, could bode poorly for Asian stock markets.

India’s Nifty 50 and BSE Sensex 30 indexes somewhat bucked the trend, trading in a flat-to-low range after data on Monday showed that CPI inflation eased in February from the prior month.

While the reading was still higher than expected, a sustained decline in inflation could spur an eventual pause in the Reserve Bank’s rate hike cycle.

Australia’s ASX 200 index sank 1.6%, with shares of the country’s big four banks down between 0.4% and 1.3%. Commonwealth Bank of Australia (ASX:CBA), the largest of the lot, fell 0.4%.

A private survey showed on Tuesday that Australian consumer sentiment remained pinned near pandemic-era lows, amid continued pressure from high inflation and rising interest rates.