| A man walks near Credit Suisse bank headquarters in New York City, Wednesday. Reuters-Yonhap |
By Yi Whan-woo
The risk of failure faced by Credit Suisse could see financial markets in Korea rattled due to an increase in fear over a possible global banking crisis prompted by the collapse of Silicon Valley Bank (SVB), according to analysts, Thursday.
"It should be noted that the stock market in Seoul could suffer more losses if Credit Suisse failed to secure liquidity today," an NH Investment & Securities analyst said, asking not to be named.
He referred to benchmark KOSPI which opened on a near 1 percent decline, Thursday, after shares of Credit Suisse hit an all-time low for a second consecutive day and resulted in sparking huge bank sell-offs on Wall Street, European markets and some Asian markets.
The plunge came as the Swiss multinational bank's largest shareholder ― Saudi National Bank ― refused to provide any more funding.
Later on Thursday, Swiss financial regulators vowed to lend $54 billion, regarding which the NH Investment & Securities analyst said: "managed to assuage fears over Credit Suisse fiasco at the Seoul stock market."
The KOSPI finished at 2,377.91 points, down 1.81 points, or 0.08 percent, from the previous day's close.
"Though the bank's acquisition of liquidity solved the immediate problem, it can have a ripple effect on the financial market. It should not be ruled out that repercussions from the Credit Suisse crisis, coupled with SVB's fallout, can intensify market volatility at any time," the analyst said.
Lee Sang-ho, head of the economic policy team at the Korea Economic Research Institute (KERI), said that Seoul's currency market is believed to be more secure from its stock market concerning the Credit Suisse crisis, although he still warned of possible repercussions.
The Korean won weekend against the dollar, Thursday, with the won-dollar rate finishing at 1,313 won per dollar, up 9.3 won from Wednesday.
"Such level of ascent in the won-dollar exchange rate was witnessed even before the Credit Suisse crisis," Lee said. "And I'd say market expectations toward the much-anticipated dovish policy during a U.S. rate-setting next week is strong enough to offset the fear of possible capital exodus in relation to Credit Suisse," Lee said.
He was referring to market speculation that the U.S. Federal Reserve may re-think its aggressive credit tightening, as a steep rate hike has been regarded as a reason for SVB's downfall.
The Fed was poised for a 50 basis rate hike or higher before SVB's bankruptcy, but now it is believed to be leaning toward a 25 basis rate hike.
Concerns over the outflow of foreign capital have persisted as the Korea-U.S. interest rate gap has widened, with the U.S. rate staying in a 4.50-4.75 percent range over Korea's 3.5 percent.