Monday 02 Oct 2023
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KUALA LUMPUR (March 17): The collapse of Silicon Valley Bank (SVB) in the United States and problems at Credit Suisse Group AG will not trigger a global financial crisis similar to that in 2008, said Rakuten Trade Sdn Bhd head of research Kenny Yee.

“At the moment, things are pretty well contained. In the US, there have been efforts to recapitalise the banks. It is just a matter of how the banking sector wants to react. At the moment,  there are only a handful of banks that are facing the liquidity crunch. And over in Europe, only Credit Suisse is on the list,” Yee said during a media briefing on the second-quarter (2Q2023) market outlook.

“But I am sure there are a number of banks that (are) at the bottom line. Whether this will be construed as a financial crisis, at the moment, I guess not. The current situation will not be like the one that we experienced in 2008/2009,” he added. 

Financial markets globally have been roiled by the collapse of US mid-sized lender SVB, the biggest US banking failure since the 2008 financial crisis. 

Credit Suisse also made news headlines as the bank became the first major global bank to take up an emergency lifeline since the 2008 financial crisis. On Wednesday (March 15), Credit Suisse said it would borrow up to 50 billion Swiss Francs from the Swiss central bank to shore up its finances.

“The US Fed has been too slow in reacting to its inflationary pressure and too fast in hiking interest rates. Smaller banks in the US are unable to cope with the drastic changes in interest rates environment, hence they are burdened with paper losses of those bonds they bought much earlier,” Yee explained.  

Local banks are well shielded from the uncertainties

Local banks have been battered amid fears of wider financial contagion globally from the crisis engulfing the US banks.

Yee said the recent selldown in banks is seen as a knee-jerk reaction to the news of the banking crisis happening in the US.

“This will improve over time, because I think now, it is linked to the knee-jerk reaction. But over time, when things settle down, you can see that prices of the banking sector should recover,” he said. 

“I think the local banks are pretty well shielded from the trauma over in the US. Our banks are pretty conservative and well capitalised. Even for the domestic consumer application, they have been very stringent in approving loans. The amount of rejection for loan approval is rather high. So I doubt our Malaysian banks are directly impacted from the drama world in the US and Europe with regards to the uncertainty,” Yee added.

At the time of writing, the Financial Services Index had recouped losses, as it rebounded 185.82 points or 1.21% to 15,586.66, after tumbling to a nearly 15-month low of 15,353.89 on Thursday, as local banks were battered amid the global market rout on bank crisis fears.

Banks were among the top gainers on Bursa Malaysia. Shares in Hong Leong Bank Bhd rose 20 sen or 1.01% to RM20.10, Malayan Banking Bhd’s (Maybank) share price went up 12 sen or 1.45% to RM8.38. Hong Leong Financial Group Bhd also gained 14 sen or 0.78% to RM18.14.

Other heavyweight banks that posted gains were CIMB Group Holdings Bhd, up seven sen or 1.36% to RM5.22, Public Bank Bhd increased four sen or 1.36% to RM3.97, while RHB Bank Bhd rose one sen or 0.18% to RM5.50.

Smaller peers also followed suit. Bank Islam Malaysia Bhd jumped 2.73% or six sen to RM2.26, and Malaysia Building Society Bhd rose one sen or 1.74% to 58.5 sen, while Alliance Bank Bhd eked out gains of two sen or 0.60% to RM3.33.

Edited BySurin Murugiah & Lam Jian Wyn
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