AHAM Asset Management said while the implosion of SVB is unlikely to spark a financial crisis, the financial episode does expose the vulnerability of certain sectors as interest rates rise rapidly.
“This is something that the US Federal Reserve (Fed) would take into consideration in future policy meetings,” it said in an investment note.
A key point to monitor is whether SVB’s collapse would pose any significant dent to confidence and lead to a decline in consumption.
“This could hasten a slowdown in economic growth as the impact of monetary policy also begins to bite,” it noted.
The asset manager confirmed that none of its equity or fixed income portfolios “have any direct exposure to SVB”.
“For equities, we remain positive on Asia as China’s reopening provide tailwinds to the region and support growth,” said AHAM.
MIDF Amanah Investment Bank Bhd research head Imran Yusof said it does not see an impact yet, especially as US regulators have stepped in to protect depositors.
“But we are studying the scale (of the problem). As for Malaysia, the impact will only be felt if it impacts the US economy.
“We opine the impact will be moderated by the US government technically guaranteeing the deposits,” Imran told FMT Business, adding any impact will be on “investor sentiment”.
“On the flip side, the market now expects a slower pace of interest rate hikes (by the Fed), which should be good for the market,” he added.
Contrarian view
Mercury Securities equity analyst Ronnie Tan is less optimistic about the US banking debacle. He warned the significant collapse of SVB and SB could be an indicator that a recession will follow suit.
“While the US futures were up after the US federal government announced actions (yesterday) to shore up deposits and stem any broader financial fallout from the collapse of SVB, we think the market will remain volatile going forward,” he said.
Another capital market analyst, who declined to be named, said SVB may not be the first and last US bank to fall.
“Unfortunately, this could be the start of more (failures) due to more than 10 years of ‘easy money’ with low interest rates.
“But in just one year, the Fed, European Central Bank (ECB), and other central banks have been raising interest rates rapidly. This is really testing financial institutions,” he added.
The analyst was sceptical about prevalent views that the US banking system is resilient and on a solid foundation, in large part due to reforms made after the last financial crisis in 2007 and 2008.
“The same thing is said after every crisis. However, the authorities are always on the backfoot, and I don’t see any change despite reform in the US even after the great financial crisis,” he added.
He argued the problem pre- and post-great financial crisis for big banks have compounded as they were too big to fail before, and are too big to fail now, and have gotten even bigger.
“The systemic risk posed by some of these megabanks have gone up,” he said.
Start-ups, VCs dodged SVB bullet
The ripple effects of SVB’s collapse have reached far and wide with start-ups in Europe, Singapore, China and even Malaysia affected by the shut down.
Malaysia is home to dozens of start-ups funded by venture capitalists (VCs) operating out of Malaysia and Singapore holding accounts with SVB.
E-commerce solutions provider AllSome Fulfillment, which has operations in Malaysia and China, told FMT Business that SVB is their main bank to receive funding and pay out for its operations.
The company, fortunately, managed to dodge the SVB bullet. “We are lucky that we capped funds at US$250,000 before the bank collapsed,” AllSome founder and chief technology officer Ng Yi Ying told FMT Business.
Ringgit Plus co-founder Hann Liew opined the move by US regulators to guarantee all deposits of SVB and SB helped avert a crisis that would have drained liquidity from the entire system, causing many start-ups and VCs to collapse alongside.
On Sunday evening, US banking regulators moved swiftly to backstop all deposits at SVB, which was shuttered on Friday, putting to rest fears that companies and start-ups would struggle to pay their employees this week.
“Fortunately, between the US government, Fed, Federal Deposit Insurance Corporation (FDIC), and the Bank Term Funding Programme, it should give everyone confidence all depositors should be able to immediately access 100% of their money, averting catastrophe,” Liew told FMT Business.