Wednesday, May 31, 2023
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Stocks creep toward quarterly gain as bank fears subside

SINGAPORE — Asia’s stock markets posted recent gains on Thursday, as fears of a banking crisis receded and investors weighed whether a dissolution of Chinese conglomerate Alibaba signals Beijing’s regulatory onslaught on tech companies may finally be fading.

The MSCI index of Asia Pacific equities outside Japan rose 0.2 percent. Like the S&P 500, it has recovered from the March lows as the impact of the Silicon Valley bank collapse rebounded on global markets.

Global equities are on course for a quarterly gain of 4.9 percent. Japan’s Nikkei, which is on track for a quarterly gain of 6 percent, slipped 0.8% on Thursday. US and European stock futures were broadly stable.

Calmer markets mean investors can now focus more on the economy as German, Spanish and Italian inflation figures come out later in the day.

On Wednesday, Wall Street indices had jumped after the top US banking regulator appeared before Congress and focused on failings at Silicon Valley Bank and its oversight, rather than broader systemic aspects of the financial sector.

Lawmakers attack US regulators over Silicon Valley bank collapse

The US dollar was firmer, particularly against the safe-haven Japanese yen, as investors trimmed some of the positions they had built up over the past few weeks.

The yen was last traded at 132.59 against the dollar.

As the dust settles on a wild and volatile ride after the collapse of Silicon Valley Bank sparked fears of a broader banking crisis, the winners appear to be bonds and big tech companies, which tend to benefit from falling interest rates.

From the two-year term through the 30-year, US yields are below the Fed’s current benchmark rate of about 4.8 percent as markets have dramatically reassessed the interest rate outlook.

Two-year yields fell 30 basis points over the quarter, the first quarterly decline since March 2020.

The rate-sensitive Nasdaq is up almost 14 percent this year and is heading for its best quarter in more than two years.

“Bond markets were at one point dizzyingly volatile; US bonds have priced in rate cuts starting in June,” Barclays analysts said in a quarter-end note.

“(But) in times of real fear, investors run to the US dollar; in March, the euro appreciated against the US dollar. And there is no sign of funding pressures in US money markets or cross-currency swaps,” they said.

“The global economy hit a bump in March, and a significant one at that. But that’s a bump, not a wall.”


In Asia, investors are hailing Alibaba’s plans to spin off its business units and list them separately, as another signal that China is ready to welcome back global capital.

Alibaba to split into six units, explore IPOs

“We have repeatedly emphasized that 2023 marks the first time in four years that economic, regulatory and COVID policies have been aligned in a pro-growth and business-friendly manner,” Morgan Stanley analysts said.

“Yesterday’s swift announcement of (Alibaba’s) business restructuring effectively served as the ultimate confirmation that the regulatory tightening is over.”

The dissolution will turn the conglomerate into a holding company rather than an operating one, CEO Daniel Zhang said in a conference call Thursday. Alibaba shares in Hong Kong, which topped HK$300 in 2020, traded up 1.5 percent to HK$96 on Thursday. The wider Hang Seng was flat.

Elsewhere in commodities trading, Brent oil futures stabilized at $77.95 a barrel and gold, which has risen sharply in recent weeks, was under mild pressure at $1,962 an ounce.

The euro held steady at $1.0844 while bitcoin topped $29,000 and was set for its best quarter in two years.

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