KGI Asia Commentary

Hang Seng Index rose 291 points on Wednesday

The Hang Seng Index rose 291 points or 1.5% to 19,539 on Wednesday. HSTECH rose 75 points or 2.0% to 3,866 and HSCEI rose 120 points or 1.9% to 6,559. Daily market turnover was HK$108.0bn.

Dow ends lower on Wednesday as banking crisis spreads to Europe

The Dow fell on Wednesday, as concerns over the banking crisis spreading to Europe weighed on the broader market. At one point, the Dow fell more than 700 points. The Dow ended down 280.83 points, or 0.9%, to 31,874.57. The S&P 500 fell 0.7% to 3,891.93. The Nasdaq Composite edged up 0.05% to 11,434.05. Credit Suisse Group shares fell 14% as concerns over the Swiss lender intensified after its biggest backer, the Saudi National Bank, said it could not provide further financial support due to regulatory constraints. However, the Swiss National Bank helped ease concerns, pledging to provide liquidity to Credit Suisse if needed. The turmoil at Credit Suisse added to fears of a massive banking crisis at a time when some U.S. banks are also in the spotlight. Shares of First Republic fell more than 20% after credit rating agency S&P Global downgraded the bank's credit rating to BB+, or "junk," from a-, citing concerns that depositors may withdraw their funds. Fears of a deepening banking crisis have grown despite the Federal Reserve's bailout of Silicon Valley Bank and Signature Bank, while introducing a new facility to prevent further bank runs. However, this has not curbed the crisis of confidence in the banking industry, increasing the possibility of no interest rate hike.

SNB says it will provide liquidity to Credit Suisse if necessary

Credit Suisse had previously delayed its annual report and said Tuesday that it found “material weakness” in its financial reporting in prior years. Later, Credit Suisse's largest shareholder, the Saudi National Bank, said it was unable to provide additional funding to the company due to regulatory issues. The Saudi lender's chairman made clear his group is happy with Credit Suisse's turnaround plan and that the company's financials look strong. Credit Suisse shares tumbled after ruling out further aid from Saudi banks.

The Swiss Financial Market Supervisory Authority and the Swiss National Bank (SNB) later said in a statement that Credit Suisse “meets the capital and liquidity requirements imposed on systemically important banks” and that SNB will step in if situation changes. The regulator also said the collapse of two regional U.S. banks in the past week did not pose a “direct risk of contagion” to Swiss banks.

Hong Kong Stock Connect had a net inflow of HK$3.9bn on Wednesday, of which Tencent (700) had the largest net inflow, reaching HK$0.68bn; followed by CAM HS TECH (3088). Xiaomi (1810) recorded the largest net outflow at HK$168mn, followed by East Buy (1797).