SINGAPORE: Asia’s stock markets held recent gains on Thursday, as fears of a banking crisis receded and investors weighed whether a break-up of Chinese conglomerate Alibaba signals Beijing’s regulatory storm aimed at tech companies might finally be clearing.
MSCI’s index of Asia-Pacific shares outside Japan rose 0.2%. Like the S&P 500 it’s recovered from March lows hit as fallout from the collapse of Silicon Valley Bank reverberated around global markets. Global stocks are on course for a 4.9% quarterly gain.
Japan’s Nikkei, which is heading for a 6% quarterly gain, slipped 0.8% on Thursday. US and European stock futures were broadly steady.
Calmer markets mean investors can now afford to focus more on economics, with German, Spanish and Italian inflation data due later in the day.
On Wednesday, Wall Street indexes had jumped after the US banks’ top regulator appeared before Congress and focused remarks on failures at Silicon Valley Bank and its supervision, rather than broader systemic across the financial sector.
The US dollar was firm, particularly against the safe-haven Japanese yen as investors wound back some of the positions built up in the last couple of weeks.
The yen last traded at 132.59 to the dollar.
As the dust settles on a wild and volatile ride after Silicon Valley Bank’s collapse unleashed fears of a broader banking crisis, the winners appear to be bonds and large tech companies that tend to benefit when interest rates fall.
From the two-year tenor all the way to the 30-year, US yields are below the current Fed funds rate of roughly 4.8% as markets have dramatically re-priced the rates outlook.
Asia shares skittish, US and Europe futures edge higher
Two-year yields are down 30 basis points for the quarter, the first quarterly fall since March 2020. The rates-sensitive Nasdaq is up nearly 14% this year and heading for its best quarter in more than two years.
“Bond markets have been dizzyingly volatile, at one point; US bonds priced in rate cuts starting in June,” analysts at Barclays said in a quarter-end note. “(But) in periods of true fear, investors run to the US dollar; in March, the euro strengthened against the US dollar. And there are no signs of funding pressures in US money markets or cross-currency swaps,” they said.
“The global economy hit a bump in the road in March, and a significant one. But this is a bump, not a brick wall.”
Alibaba
In Asia, investors are cheering plans from Alibaba to spin off and separately list its business units as another signal that China wants to welcome back global capital.
“We have repeatedly emphasised that 2023 is the first time in four years that economic, regulatory, and COVID policies have been aligned in a pro-growth, pro-business fashion,” Morgan Stanley analysts said.
“The swift announcement of (Alibaba’s) business restructuring yesterday effectively served as the ultimate stamp of reassurance that regulatory tightening has ended.”
The breakup will transform the conglomerate into a holding company, rather than an operational one, chief executive Daniel Zhang said on a Thursday conference call. Alibaba shares in Hong Kong, which hit above HK$300 in 2020, traded up 1.5% at HK$96 on Thursday.
The broader Hang Seng was flat. Elsewhere, in commodity trade, Brent oil futures steadied at $77.95 a barrel and gold, which has surged over the past few weeks, was under gentle pressure at $1,962 an ounce.
The euro was steady at $1.0844, while bitcoin topped $29,000 and was set for its best quarter for two years.
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