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Weekly Sprout

Banks in crisis

18 Mar 2023

Credit Suisse and First Republic Bank turmoil

The collapse of Silicon Valley Bank is still causing ripples across the industry. 

Just this week alone, Swiss bank Credit Suisse and US regional bank First Republic Bank had to receive some form of liquidity support. 

Closer to home, the flight to safe assets also translated to a lower yield of 3.65% p.a. on the latest 6-month T-bill auction.

If the market volatility is affecting your plans to invest consistently, we look at how a regular savings plan can help you get back on track. 

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Source: Bloomberg. Price as of 17 March

🔗 Who's the weakest link? 

What happened? 

Credit Suisse’s share price plunged after its top shareholder, Saudi National Bank, ruled out investing more in the Swiss bank. 

Switzerland’s central bank subsequently came in to provide a liquidity backstop in an attempt to restore confidence in the bank. 

What does this mean?

Global confidence in the financial system remain shaky as investors worry about contagion from Silicon Valley Bank’s collapse. 

In the US, the biggest US banks pledged US$30 billion of deposits to rescue First Republic Bank in a move orchestrated by the US government. 

The Monetary Authority of Singapore (MAS) said that Singapore banks’ exposure to Credit Suisse are insignificant, and DBS, OCBC and UOB are well capitalised. 

Why should I care? 

Investors are expecting the US Federal Reserve (Fed) to slow down the pace of interest rate hikes with the ongoing banking crisis. 

The Fed is expected to raise interest rates by 0.25% in its meeting on 21-22 March, less than previous expectations of 0.50% or more. 

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Webull March 2023 banner 2-1.jpeg


🚗 WHAT'S MOVING

  • Meta announced that it would cut another 10,000 jobs this year, following a previous round of cuts in November affecting 11,000 workers.  Earlier, CEO Mark Zuckerberg pitched 2023 as the company’s “year of efficiency”. 
  • Baidu unveiled its artificial intelligence-powered chatbot ERNIE Bot, its answer to ChatGPT, and announced that more than 30,000 businesses had signed up to test its chatbot within three hours of its demonstration. 
  • FedEx reported profit above market expectations and raised its earnings forecast for the full year.
  • Sembcorp Industries has secured a contract to build, own and operate a 500 megawatt (MW) solar power plant in Oman through a 80% owned joint venture. The project is backed by a 20-year power purchase agreement. 

Source: Bloomberg, CNBC, Financial Times, Business Times, Edge Singapore

 


💡 THE BIG IMPORTANT STORY

T-bill yield sinks to 3.65% p.a. What caused the sharp decline?

The yields submitted for competitive bids fell in the latest T-bill auction on 16 March. 

T-bill auction 16 March 2023 allocation

 


🤓 WHAT WE’RE LOOKING OUT FOR THIS WEEK

Source: Bloomberg, SGX 

 


🍭 THAT’S INTERESTING

Almost half of German employers in Singapore said “psychological distress and lower work performance is visible among staff” due to the unpredictable housing situation. Half of the firms polled by the Singaporean German Chamber of Industry and Commerce (SGC) anticipate rents rising by 30-50% in 2023, while 16% of respondents even expect increases of more than 50%.

Source: Business Times

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