Japanese stocks open lower after Silicon Valley Bank implosion

Japan’s benchmark stock index fell 1.5 per cent shortly after opening and the dollar declined on Monday as traders absorbed a chaotic glut of headlines around the collapse of Silicon Valley Bank and the potential for shockwaves through the global financial and tech sectors.

The fall in the Topix, in the first 10 minutes of trading, sent the benchmark below the 2,000-point line in what investors said was initially a relatively cautious market response.

Shares in SoftBank, which is seen among Japanese companies as potentially the most exposed to the unfolding crisis, fell around 2.3 per cent in early trading.

“So far, it’s just looking like a regular bad day for Tokyo. Nothing crazy, but clearly low appetite for risk and a chance things could turn worse any minute,” said one Tokyo-based broker.

US regulators closed Silicon Valley Bank, a crucial financial institution for start-ups, on Friday after customers rushed to withdraw $42bn — a quarter of total deposits — in a single day.

The Silicon Valley lender also played an important function in China’s dollar-based ecosystem for funding fledgling companies, according to industry insiders, with companies holding money at the bank before bringing it onshore to mainland China.

But Hong Kong’s Hang Seng index and mainland China’s CSI 300 rose 1.2 per cent and 1 per cent, respectively, on Monday. Shanghai Pudong Development Bank, which owns a stake in a joint venture with Silicon Valley Bank’s China unit, lost 1.3 per cent.

The US Federal Reserve on Sunday announced a new lending facility aimed at providing extra funding to eligible depository institutions to ensure that “banks have the ability to meet the needs of all their depositors”.

The dollar dropped 0.4 per cent against a basket of other currencies on Monday morning in Asia. China’s renminbi added 0.8 per cent to trade at Rmb6.903 per dollar.

US equity futures, meanwhile, pointed sharply higher, with contracts for the S&P 500 up 1.4 per cent. Futures in Hong Kong tipped the Hang Seng to open flat, while South Korea’s Kospi dropped just 0.6 per cent.

One large Tokyo-based fund manager said the perception going into the week was that the SVB resolution looked good enough to draw a line under the crisis, easing fears of a domino effect.

But another trader in Tokyo said despite the fact that US futures were now rising on word of the Fed’s intervention in SVB, traders remained cautious as investors locked in gains from the previous five sessions and braced for further news.