Concerns Over "Monday the 13th" in US Stock Market... No Major Impact on Asian Markets

Possibility of Black Monday Becoming Reality
Slight Decline Following Announcement of Full Deposit Protection
Australian Stock Market Also Shows Limited Drop

The fear surrounding the bankruptcy of Silicon Valley Bank (SVB), which was a major funding source for U.S. startups, is weighing heavily on global financial markets. The sudden bankruptcy proceedings of the bank, with total assets amounting to $209 billion (277 trillion KRW), inevitably trigger a chain reaction of shocks. There are growing concerns that the 'Black Monday' shock, where stock prices plummet on the first trading day after the bankruptcy decision on the 13th (local time), could become a reality. However, after the U.S. Treasury announced on the 13th, ahead of the Asian market opening, that it would protect all SVB deposits, the stock markets appear to be experiencing less impact than expected.

[Image source=Yonhap News]

U.S. Stock Market Fears 'Monday the 13th'... SVB Asset Sale Underway

SVB's bankruptcy is the largest among U.S. banks since Washington Mutual Bank collapsed during the 2008 global financial crisis. The market fears that if bank transactions resume on Monday the 13th, SVB's major clients?startups in Silicon Valley?will face greater chaos due to inability to access cash. In financial markets, warnings comparing the situation to 'Friday the 13th' are pouring in, predicting a 'Monday the 13th' crisis.

SVB branches will open that day and pay depositors up to the insured limit of $250,000. However, 85% of total deposits, amounting to $151.5 billion, are identified as uninsured deposits exceeding the limit. Since amounts exceeding the limit are not protected, depositors face significant losses. Billionaire investor Bill Ackman, founder of Pershing Square hedge fund, warned, "Without system-wide (FDIC) deposit guarantees, more bank runs will start from Monday morning."

Accordingly, the Federal Deposit Insurance Corporation (FDIC), the bankruptcy receiver of SVB, is transferring all existing SVB deposits to the corporate 'Santa Clara Deposit Insurance National Bank (DINB)' and has been pushing for asset sales since the previous day. Rapid asset sales are necessary to return as many deposits as possible to customers. The final bid deadline is this afternoon. However, there is also a possibility that no deal will be made. A source who requested anonymity told Bloomberg News, "The FDIC aims for a swift deal," but added, "No final decision has been made yet, and there is a possibility that no agreement will be reached." The Associated Press reported that several auction participants have shown interest in SVB's assets.

Currently, many tech companies are known to have large deposits at SVB. Streaming device manufacturer Roku confirmed that about a quarter of its cash and cash equivalents, approximately $487 million, are deposited at SVB. Roblox disclosed having $150 million in deposits. Bloomberg News pointed out that "Besides tech companies, SVB operates a branch in Napa Valley, California, and has lent $4 billion solely to the wine industry, so the impact could extend to wine production." Startups, immediately facing a liquidity cliff, are increasingly fearful that failure to retrieve deposits could lead to a wave of bankruptcies. Reports indicate that thousands of companies do not even have money to pay next week's salaries. Parker Conrad, CEO of Rippling, confirmed on Twitter, "Some payrolls have not been completed." Failure to pay wages constitutes a violation of labor laws.

[Image source=Reuters Yonhap News]

U.S. Announcement of Full Deposit Protection Leads to Slight Decline in Asian Markets

However, the Asian stock markets that opened on the 13th after the SVB incident do not appear to have suffered as much shock as initially feared. As of 10:01 a.m. on the 13th, the KOSPI was down 0.57% (13.61 points) at 2380.98. It started at 2400.45, up 0.24% (5.86 points), but turned downward early in the session, falling below the 2400 mark. At the same time, the KOSDAQ was trading at 777.56, down 1.40% (11.04 points). The KOSDAQ index opened at 784.02, down 0.58% (4.58 points).

The Australian stock market also started lower but with a smaller decline. The S&P/ASX 200, Australia's benchmark index, was down 0.86% at 7083.20 as of 1:58 a.m. local time compared to the previous close.

Seo Sang-young, head of the Media Content Division at Mirae Asset Securities, said, "Concerns related to the SVB incident stem from the possibility that if deposit withdrawals are halted, companies' financial activities could be disrupted. However, since the U.S. government intervened and announced that people with deposits at SVB will have access to their money, the spread of concerns is unlikely." He added, "Nevertheless, with issues such as the Biden administration's restrictions on semiconductor manufacturing equipment exports to China, ongoing U.S.-China tensions, and the upcoming U.S. Consumer Price Index (CPI) release, market participants are likely to remain cautious, resulting in a volatile market."