1) Thai stock market overview
Thailand’s SET Index closed at 1,577.18 points, increased 21.73 points or 1.40% with a trading value of 53 billion baht. The analyst stated that concerns in the market had dissipated, while there are no other banks closing due to the fallout. The Swap Line by global central banks also helps boost confidence in the market as well.
2) Vanguard announces a complete exit from China and Ant Group
The asset management giant Vanguard Group Inc. has announced that it will close the remaining business in China after it started to withdraw from the world’s second largest economy two years ago. This includes the company leaving a joint venture with Jack Ma’s Ant Group as well.
Vanguard owns a 49% stake in this JV. Meanwhile, the source said that Ant is considering purchasing all stake from Vanguard.
Vanguard saw shrinking profit amid expansion of its rival BlackRock and Fidelity in recent years.
Fidelity and Neuberger Berman Group recently joined BlackRock to launch onshore funds through new wholly-owned units, while Manulife Financial Corp., JPMorgan Chase & Co. and Morgan Stanley received approvals to buy out local partners to gain full control of existing ventures.
3) Credit Suisse AT1 bondholders consider legal actions after $17bn wipeout
A group of bondholders are talking to lawyers from Switzerland, the United States and UK to seek legal action against Credit Suisse after Additional Tier 1 bonds (AT1) were wiped out as part of a rescue takeover by rival Swiss lender UBS.
The deal agitated bond investors due to the UBS-Credit Suisse merger allowing shareholders, who usually rank below bondholders in terms of who gets paid when a bank or company collapses, to receive $3.23 billion while holders of Credit Suisse AT1 bonds worth around $17 billion US dollars will be left with nothing.
Global litigation firm Quinn Emanuel Urquhart & Sullivan, claimed that it is in talks with a number of creditors of Credit Suisse, “representing a significant percentage of the total notional value of AT1 instruments issued by Credit Suisse”. The attorneys will likely convene to discuss the alternatives for potential legal action on Wednesday March 22.
4) Nomura in the only firm believing Fed will cut rates to boost confidence
Nomura is the only firm according to a Reuters poll that expected the U.S. central bank to cut rates as persistent inflation will likely be outweighed by the need to maintain confidence in the banking system.
Against the backdrop of the Fed and regulators to stop the bleeding in the banking system, Nomura expected a 25bp rate cut along with a halt of QT at the March FOMC meeting. The firm said that the ongoing financial stress was in large part caused by the rapid pace of rate hikes by the Fed. The central bank halting rate hikes and demonstrating a willingness to use monetary policy to contain financial stability risks may be necessary to restore market confidence in the banking system.
This 25bp rate cut would be unlikely materially support the banking sector, but a rate cut should send two strong message to the markets; 1) the central bank is ready to use monetary policy to contain financial stability risks and 2) the Fed is entering a phase of fine-tuning its stance on monetary policy.
In addition, Nomura expected the Fed to announce a halt of the quantitative tightening program.
