SINGAPORE - Asian stocks slid on Thursday and investors turned to the safety of gold, bonds and US dollars as Credit Suisse became the latest focal point for fears of a banking crisis, leaving markets on edge ahead of a European Central Bank meeting later in the day.
Credit Suisse’s announcement that it will take up an option to borrow as much as 50 billion Swiss francs (S$72.6 billion) from Switzerland’s central bank soothed some of the gravest concerns and provided a floor to bank shares and a boost to Europe futures.
But sentiment was fragile and a nervous air hung over markets. MSCI’s index of Asia-Pacific shares outside Japan fell to 2023 lows and was down 0.9 per cent by mid-morning.
“I think we’re getting into the hard hat territory again,” said Mr Damian Rooney, a dealer at Perth stockbroker Argonaut. “The word contagion is knocking about... we’re getting fear across the whole board here.”
Credit Suisse stock plunged as much as 30 per cent to a record low overnight. The Swiss franc suffered its biggest drop on the US dollar in seven years.
Insurers, banks, miners and consumer-exposed stocks led the losses around Asia as worries grow that a potential credit crunch can worsen a looming economic slowdown.
Japan’s Nikkei index sank 2 per cent in early trade, before paring losses to 1.2 per cent, while Australia’s S&P/ASX 200 likewise slumped 2 per cent before trimming losses to 1.6 per cent.
Hong Kong’s Hang Seng Index tumbled 1.75 per cent and South Korea’s Kospi index dropped 0.5 per cent.
Singapore’s Straits Times Index was down 0.8 per cent at 9.41am local time, led by the trio of local banks. DBS shares lost 1.8 per cent to $32.39, while OCBC fell 1.1 per cent to $12.14 and UOB declined 0.7 per cent to $28.
Oil rose slightly from its lowest close in 15 months after a three-day rout started by the US banking crisis. West Texas Intermediate futures edged above US$68 a barrel after tumbling around 12 per cent over the previous three sessions.
Safe-haven gold was up 0.1 per cent at US$1,919.86 per ounce, after rising more than 1 per cent on Wednesday. The precious metal is considered a hedge against economic uncertainties, and tends to gain on expectations of lower interest rates.
Expectations for a 50 basis-point rate hike in Europe have evaporated as markets radically rethink the global interest rate outlook in the light of the banking jitters.
Money market pricing implies a less than a 20 per cent chance of a 50 basis-point hike from the ECB, down from 90 per cent a day earlier.
Shares in big US banks including JPMorgan Chase, Citigroup and Bank of America fell overnight, pushing the S&P 500 banking index down 3.62 per cent.
Bonds rallied hard, driving two-year US Treasury yields to their lowest since September at 3.72 per cent at one point overnight.
Benchmark 10-year yields fell 14 basis points to 3.494 per cent.
The euro also dropped heavily overnight as the US dollar surged, falling 1.4 per cent to US$1.0578.
The flight to safety lent support to the yen, and it rose 0.6 per cent to 132.59 per dollar in Asia trade on Thursday. REUTERS
