The collapse of the SVB could add to the anxiety of Chinese equity investors

HONG KONG, March 12 (Reuters) – Chinese stock investors, already disappointed by Beijing’s weaker-than-expected economic growth target for the year, will be further discouraged by the sharp collapse of U.S. lender SVB Financial Group, market participants said.

China’s CSI300 index (.CSI300) fell 4% last week, while Hong Kong’s Hang Seng (.HSI) fell 6% amid China’s moderate GDP growth target d around 5% for 2023 – set at the annual buffer session of parliament – dashing hopes of a big recovery.

Market sentiment could be further dampened after Friday’s sudden collapse of start-up-focused lender SVB (SIVB.O), which sparked heated discussions over the weekend in China about its fallout.

“The SVB’s failure is a barometer of macroeconomic risks…reflecting the impact of central bank interest rate hikes on asset prices,” said Yuan Yuwei, hedge fund manager at Water Wisdom Asset Management. , predicting tougher times for highly leveraged and illiquid companies. assets.

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Although the event is unlikely to trigger another financial crisis, it could have a negative psychological impact on Chinese markets, he said.

SVB’s Chinese joint venture with Shanghai Pudong Development Bank (600000.SS) said on Saturday it had a strong corporate structure and an independently managed balance sheet, in an apparent effort to appease local customers.

But many Chinese tech start-ups, especially those funded in dollars, have opened US accounts at SVB. At least one WeChat group of several hundred members has been formed by anxious Chinese SVB customers seeking to protect their interests.

Lower risk appetite could dampen any excitement over an expansion of the China-Hong Kong Stock Connect on Monday. More than 1,000 A-shares listed in China and nearly 200 shares traded in Hong Kong will be added to the cross-border investment program.


Li Bei, fund manager at Banxia, ​​a Shanghai-based hedge fund house, said it had reduced its equity holdings and would “maintain relatively low exposure”, citing a lack of good opportunities.

A cautious economic stimulus for 2023 and a relatively tight credit environment mean “it is difficult for equities to rally further from current levels and the market will remain volatile,” Banxia wrote in a letter to investors last week. .

China kept its central bank governor and finance minister on Sunday, near the end of the weeklong session of the National People’s Congress (NPC), where Xi Jinping began his third five-year term. as Chinese President. Li Qiang, a longtime Xi confidant, was promoted to prime minister to lead the economy, which grew just 3% last year.

Derek Lin, portfolio manager at Boston-based Columbia Threadneedle Investment, said the government “needs a good year” but isn’t rushing to launch big stimulus, so “the market is trying to excite, but there is some hesitation.”

Stanley Tao, founder and CIO of Golden Nest Capital Management, said he doesn’t expect a broad-based bull market in China this year as a soft property market will remain a drag on the economy. He is wary of tech stocks that could be hurt by US-China friction.

Still, domestic A-shares are likely to outperform offshore Chinese stocks, which are more vulnerable to potential fallout from the SVB’s collapse, analysts said.

Chaoping Zhu, global market strategist at JPMorgan Asset Management, said the SVB fiasco reflects tighter funding conditions for tech companies during the U.S. rate hike cycle.

“The concern is that we are only seeing the tip of the iceberg,” Zhu said during a live broadcast on Saturday.

(This story has been reclassified to set the deadline)

Additional reporting by Samuel Shen and Georgina Lee; Editing by Raju Gopalakrishnan

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