Local bank stocks hit by shockwaves from SVB, CS collapses

The Korea Times

The Korea Times

Finance

Mon, October 2, 2023 | 10:43

Markets

Local bank stocks hit by shockwaves from SVB, CS collapses

Posted : 2023-03-27 16:14

Updated : 2023-03-28 16:08

The logo of Swiss bank Credit Suisse is seen in front of a branch office in Bern, Switzerland, Nov. 29. Reuters-Yonhap

By Lee Min-hyung

Korea's bank stocks are being hit by repercussions from the sequential collapse of overseas financial institutions, with foreign investors dumping major financial shares here en masse this month.

Major financial stocks such as Shinhan Financial Group and Hana Financial Group suffered double-digit losses between March 2 and 24, according to data from the Korea Exchange. The KRX Bank Index, which contains nine major financial and banking shares here, also fell by 9.46 percent during the same period.

This was triggered by a mass foreign exodus after the abrupt fallout of Silicon Valley Bank (SVB) in the United States earlier this month. The SVB-sparked market concern escalated further after other financial firms including Credit Suisse (CS) and Deutsche Bank were also mired in turmoil over the possible bank run.

Experts, however, said chances appear slim that the foreign banking crisis will have more serious ripple effects in the Korean financial industry.

"Most overseas banks faced with recent liquidity crises focus on corporate finance, but this is not the case for retail-focused Korean lenders," Kim Dae-jong, a professor of business administration at Sejong University, said. "This is why Korean banks and financial institutions are relatively safer than overseas lenders at this period of the global banking crisis."

But banks' and financial stocks are forecast to face continuous price adjustments for some time due to the foreigners' selling spree.

Foreign investors sold shares of KB Financial Group ― the largest financial holding firm by market capitalization here ― worth 238 billion won during the same period. They also dumped Shinhan shares worth 195 billion won. They sold shares of four major financial holding firms, worth 554 billion won this month alone, as part of risk management amid the foreign banking crisis.

"Investors' sentiment is the most important factor in the global stock market for the time being," SK Securities analyst Cho Joon-ki said. "Commercial real estate sectors are frequently mentioned as the next possible target hit by the aftermath of the banking crisis. Investors are advised to pay special attention before investing in the sector."

A report released by the Korea Insurance Research Institute said there stands a "very low possibility" of Korea suffering from this kind of overseas banking crisis, as the country's banks are "under tight regulation on possible liquidity risks."

mhlee@koreatimes.co.kr