Due to Tuesday’s sharp drops in bank equities, the top index for Asia-Pacific lost all of its year-to-date gains and is now flat in 2023.
The MSCI Asia Pacific index lost all of its gains for the year to date as it fell to a low of 155.44 in afternoon trade, representing a drop of more than 9% from its high of 171.26 on February 2. On the last trading day of 2022, the index finished at 155.74.
On the second trading week of the year in January, the index entered a bull market, propelled by excitement over China’s reopening.
Meanwhile, MSCI’s broadest index of Asia-Pacific equities outside Japan fell 1.47% Tuesday afternoon, setting fresh year lows. Despite near-term volatility concerns, traders saw opportunity for the index to rise further last month.
Even though U.S. regulators intervened to safeguard depositors over the weekend, markets continued to see significant losses on Tuesday due to worries about a spillover impact from Silicon Valley Bank’s failure.
“Concerns about a global economic downturn continue to exert pressure on the region’s more value-focused economies,” IG analyst Yeap Jun Rong said in a note on Tuesday.
Bank stocks in Japan fell strongly on Tuesday, dragging on the broader Topix, which led the sell-off in Asia-Pacific. According to Refinitiv statistics, the index finished 2.7% down as financials fell 4.65%.
Mitsubishi UFJ Financial Group declined 8.59%, Sumitomo Mitsui Financial Group down 7.57%, and Mizuho Financial Group sank 7.14% on the Tokyo Stock Exchange. SoftBank Group, a technology conglomerate, also suffered losses of more than 4%.
Yeap also observed benchmarks such as the Straits Times Index in Singapore has close to 45% of its weightage on bank equities. Tuesday’s falls were driven by DBS, United Overseas Bank, and Oversea-Chinese Banking Company shares.