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Asian stocks rally as bank jitters calm, Alibaba lifts mood

2023-03-29T06:08:04Z

The Tokyo Stock Exchange (TSE) building is seen in Tokyo, Japan October 1, 2020. REUTERS/Issei Kato

Asian shares surged on Wednesday as easing concerns over the banking sector revived risk appetite, while Alibaba’s (9988.HK) plans to split into six units lifted Chinese tech stocks.

MSCI’s broadest index of Asia-Pacific shares outside Japan (.MIAPJ0000PUS) was 0.68% higher, with Hong Kong’s Hang Seng index rising over 2%, buoyed by Alibaba (9988.HK) after the Chinese e-commerce conglomerate announced its break-up plans.

Alibaba’s Hong Kong shares (9988.HK) shot up 15%, while the company’s U.S.-listed shares closed 14.3% higher. The news lifted investor confidence in the wider Chinese tech sector, with shares of Alibaba’s e-commerce rival JD.com Inc (9618.HK) 7% higher, and gaming giant Tencent Holdings Ltd (0700.HK) jumping 5%.

“Alibaba’s split may pave the way for other Chinese tech giants to do similar,” CMC Markets analyst Tina Teng said.

“This helps break down the monopolistic power of these conglomerates, which complies with the Chinese government’s regulatory overhaul over antitrust issues.”

Futures indicated European stocks were set to open higher, with Eurostoxx 50 futures up 0.41%, German DAX futures up 0.38% and FTSE futures up 0.08%.

E-mini futures for the S&P 500 rose 0.48%.

Also helping sentiment was easing worries over the banking sector, with investor nerves soothed by the sale of assets in collapsed lender Silicon Valley Bank and few signs of further stresses in the banking system following weeks of volatility in the market.

“The lack of any substantive developments in the banking backdrop has seen markets relatively calm by the standards of recent weeks,” said Taylor Nugent, an economist at National Australia Bank.

In the first congressional hearing into the collapse of the two U.S. regional lenders, lawmakers pressed the Federal Reserve’s top banking regulator on whether the central bank should have been more aggressive in its oversight of SVB.

Michael Barr, the Fed’s vice chairman for supervision, criticised SVB for going months without a chief risk officer and how it modelled interest rate risk.

“Investors have not completely lost their anxiety … and hints of a big regulatory overhaul are likely to weigh on the sector until details emerge,” said Robert Carnell, regional head of research, Asia Pacific at ING.

Meanwhile, in a surprise move, UBS Group AG (UBSG.S) rehired Sergio Ermotti as CEO to steer its massive takeover of Credit Suisse (CSGN.S).

Overnight, a survey showed that U.S. consumer confidence unexpectedly increased in March despite recent financial market turmoil, but Americans continued to expect inflation to remain elevated over the next year.

Worries over inflation have prompted investors to recalculate what they expect the Fed to do in its next meeting in May.

Markets are now pricing in a 60% chance of the Fed standing still on interest rates in its next meeting, the CME FedWatch tool showed.

In the foreign exchange markets, the dollar index , which measures the U.S. currency against six peers, was up 0.098%, having eased 0.3% overnight on improving risk appetite.

The euro was down 0.08% to $1.0834, while sterling was last at $1.2324, down 0.13% on the day.

The Japanese yen weakened 0.63% to 131.73 per dollar, after rising 0.5% overnight.

The Australian dollar fell 0.19% to $0.670 after inflation slowed to an eight-month low in February, helped in part by a sharp retreat in holiday travel and accommodation.

“Together with yesterday’s softish retail sales figures, this will encourage thoughts of a pause from the Reserve Bank of Australia at their next meeting, and potentially that this tightening cycle might now be over,” said ING’s Carnell.

In the commodities market, oil prices gained for a third straight day on improving market sentiment and as a halt to some exports from Iraqi Kurdistan raised concerns of tightening supply. U.S. crude rose 0.59% to $73.63 per barrel and Brent was at $78.83, up 0.23% on the day.

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