For markets in Malaysia, this contagion risk appears to be controlled and it does not appear to be spreading to the broader real local economy at the moment.
The Silicon Valley Bank crisis, which was recently sparked by rising bond yields due to the continued expectations of interest rate hikes from the Federal Reserve , appears to be frequently associated with this and is being labelled as the “second biggest financial event” after the GFC.
This is because of the proactive moves by the financial regulators as they might have been trained by circumstance to look out for any sign of early weakness in the banking system and instantly extinguish it, if necessary by force. Recently he noted there has been a small impact from the Credit Suisse investments to AHAM Asset Management’s AHAM Single Bond Series 2 and AHAM Single Bond Series 4 and the market appears to be awaiting a clearer signal from this front if things have indeed stabilised.
“If the US regulators fail to contain the regional banks’ fallout rout, it will amplify deep recession fears in the US economy, as the banks will turn more cautious in their lending while households may be wary about their deposits. The effect of share wealth loss due to a sharp falling stock market, followed by demand retrenchment could slow down the economy,” he added.
“In Malaysia, banks’ credit fundamentals remain robust and resilient, supported by strong regulatory supervision to weather heightened volatility in global financial markets,” RAM Ratings’ said.On a related matter, Maybank Investment Bank Bhd recently said local banks had ample liquidity with a loan-to-deposit ratio of 92% and liquidity coverage ratio of 145%.
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