Speaker 1: This is Bloomberg Daybreak Asia for this Monday, March thirteenth
Speaker 1: in Hong Kong, Sunday March twelfth in New York, and
Speaker 1: coming up today, The FED and the US Treasury are
Speaker 1: said to be considering an emergency lending program to backstop
Speaker 1: demands of clients of SVB. Treasury Secretary Janet Yellen says
Speaker 1: officials are focused on protecting depositors as they seek to
Speaker 1: avoid financial contagion. And China reappointed several top economic officials
Speaker 1: in a leadership reshuffle on Sunday. Bandia's government oppose this
Speaker 1: same sex marriage round says they'll buy Russian fighter jets
Speaker 1: while eight people are dead after two boats collide off
Speaker 1: of San Diego. That's all straight ahead on Bloomberg Daybreak Asia,
Speaker 1: the business news you need to start your day in
Speaker 1: just one fifteen minute podcast, available on Apples, Spotify, the
Speaker 1: Bloomberg Business app, and everywhere you get your podcasts. Good morning,
Speaker 1: I'm Brian Curtis and I'm dot Prisoner. Here are the
Speaker 1: stories we're following today. US regulators racing against the clock
Speaker 1: to find solutions for the failed Silicon Valley Bank. The
Speaker 1: FDIC kicked off that auction process. The aim is to
Speaker 1: make a portion of clients uninsured deposits available as soon
Speaker 1: as Monday, is Stransury Secretary Janet Yellen on CBS's face
Speaker 1: the nation. Let me be clear that during the financial crisis,
Speaker 1: there were investors and owners of systemic large banks that
Speaker 1: were built out, and we're certainly not looking and the
Speaker 1: reforms that have been put in place means that we're
Speaker 1: not going to do that again. But we are concerned
Speaker 1: about depositors and are focused on trying to meet their needs,
Speaker 1: a Stratesury Secretary Janet Yellen heard here on Bloomberg. Separately,
Speaker 1: the International Monetary Fund said it is closely monitoring developments
Speaker 1: and potential financial risks from SVB, while we are hearing
Speaker 1: the Federal Reserve in the US Treasury are making moves
Speaker 1: to calm bank customers rattled by the failure of SVB.
Speaker 1: We have more from Bloomberg's US Anna Palmer. Our source
Speaker 1: says the Fed and the Treasury Department are considering an
Speaker 1: emergency lending program to backstop demands by bank customers to
Speaker 1: withdraw money. This as the US seeks to stave off
Speaker 1: a deeper crisis after SVB Financial Group's failure. The measure,
Speaker 1: which would come in addition to easing terms for the
Speaker 1: Fed's discount window, would be made under the fed's Emergency
Speaker 1: Lending authority. The FED has approved invoking that authority and
Speaker 1: is awaiting final approval from the Treasury. Representatives from the
Speaker 1: Federal Reserve and the Treasury either declined to comment or
Speaker 1: didn't immediately respond to messages seeking comment. Susanna Palmer Bloomberg,
Speaker 1: day Break Asia and as mentioned by Susanne, the FED
Speaker 1: is considering easing the terms of banks access to the
Speaker 1: discount window. This could be huge. It would give firms
Speaker 1: a way to turn the assets that have lost so
Speaker 1: much value into cash without the kind of losses that
Speaker 1: toppled SVB. Such a move would also increase the ability
Speaker 1: of banks to keep up with demands from depositors to
Speaker 1: withdraw their money. They also wouldn't have to book losses
Speaker 1: by actually selling the bonds and other assets that have
Speaker 1: deteriorated so much in value with all of these rate hikes.
Speaker 1: We're told that some banks begin or did begin drawing
Speaker 1: on the discount when way back on Friday, seeking to
Speaker 1: shore up their liquidity after authorities seized svb's silicon Valley Bank.
Speaker 1: It's unclear though, how many banks actually did this. We
Speaker 1: here changes are under discussion. The FED declined to comment,
Speaker 1: so the issue, obviously one in fact, is systemic risk.
Speaker 1: We heard earlier from the former US Treasury Secretary Larry Summers,
Speaker 1: who said the collapse of SVB should not pose a
Speaker 1: risk to the financial system so long as depositors are
Speaker 1: made whole. What is absolutely imperative is that, however this
Speaker 1: gets resolved, depositors be paid back and paid back in full.
Speaker 1: And I don't see anything in any aspect of this
Speaker 1: situation that would be a basis for that being called
Speaker 1: into questions. Former Treasury Secretary Larry Summers. There now, the
Speaker 1: crisis of SVB has spurred broader concern about a mismatch
Speaker 1: between banks funding cost on one hand, and the rates
Speaker 1: they earn on their assets on the other. We know
Speaker 1: the FED steep path on rate hikes over the past
Speaker 1: year has forced banks to pay out more to depositors,
Speaker 1: while at the same time those banks receiving lower rates
Speaker 1: on some of their longer dated assets. Now, mister Summers said,
Speaker 1: these are the issues regulators need to focus on going forward.
Speaker 1: Bran and we know that SVB had positions and had
Speaker 1: joint ventures and actual branches all over the world, and
Speaker 1: so it becomes very important. We know that Silicon Valley's bank,
Speaker 1: the joint venture in China, came out and said that
Speaker 1: its operations have been independent and stable. The question on
Speaker 1: this dug is exactly how many people will believe these
Speaker 1: claims from officials, and will get to a little bit
Speaker 1: more on that in just a moment. Also in China,
Speaker 1: several top officials have been appointed to their roles during
Speaker 1: a leadership shuffle, another big story that we will cover
Speaker 1: for you today. We get more here from Bloomberg's David
Speaker 1: in Glaze. PBUC Governor Egang will remain in his post,
Speaker 1: as well as the ministers of Finance and Commerce. The
Speaker 1: reappointments were announced at a National People's Congress, and they
Speaker 1: came as a surprise, as analysts were expecting a larger reshuffle.
Speaker 1: Many predicted officials with international experience like the PBUC Governor
Speaker 1: E would be replaced by men with closer personal ties
Speaker 1: to Shi jing Ping. The retention of E in particular
Speaker 1: may be positive for market since it shows continuity. But
Speaker 1: there was a change at Vice Premier. The role went
Speaker 1: to Halifang, a close ally of President chi Jing Ping Huh,
Speaker 1: will likely replace Deo Huh as the nation's top economic official.
Speaker 1: Beijing has already created a powerful new financial regulatory body
Speaker 1: and signaled tighter government oversight and institutional reform in Hong Kong.
Speaker 1: I'm David Ingless lubric de Brick Asia. I'm Brian Curtis
Speaker 1: at seven minutes past the hour along with Doug Kisner. Doug,
Speaker 1: you have direct contagion and whether or not we might
Speaker 1: see a run on the banks, and then you have
Speaker 1: this kind of indirect contagion, which is really why I
Speaker 1: think the access to the FEDS discount window is such
Speaker 1: a big thing, because everyone was drinking from the same
Speaker 1: well water here. Borrowers loading up on low yielding, long
Speaker 1: duration securities that can only be sold at a loss.
Speaker 1: And if you're in a position where you need the
Speaker 1: money now, then you've got a big problem because they
Speaker 1: are way underwater and you're going to show some losses.
Speaker 1: So access to the FEDS discount window gets around that
Speaker 1: if that gets formally approved. And we should say this
Speaker 1: that a lot of these securities have actually increased in
Speaker 1: value a lot here just in the past couple of days,
Speaker 1: but holders are still under water. Well that is true, Brian,
Speaker 1: But it maybe it goes back to banking regulation and
Speaker 1: the degree aways banks are required to hold their capital
Speaker 1: at certain tiers of credit quality. This is something that
Speaker 1: could not have been foreseen necessarily, right. This is a
Speaker 1: function of the market where when yields were down on
Speaker 1: the long end and yields were up, that yield curve inversion,
Speaker 1: and how banks have really been hit by that process. Well,
Speaker 1: we've got Kim Forrest coming up in a few moments,
Speaker 1: founder in Cio at Book Capital Partners will get more
Speaker 1: from her. But now it's time for global news. Both
Speaker 1: prime ministers from Britain and Australia are in the United
Speaker 1: States to meet with President Biden. Dan Schwartzman has all
Speaker 1: the details in the New York Newsroom. Dan, that's right, Brian.
Speaker 1: British Prime Minister Rishi Sunak arriving in the US today.
Speaker 1: He will meet with President Biden as well as Australian
Speaker 1: Prime Minister Anthony Albanetz as the three countries discussed the
Speaker 1: next phase of the Aucus nuclear submarine program. Now all
Speaker 1: three leaders are scheduled to meet tomorrow in San Diego
Speaker 1: as Australia is looking to acquire a fleet of nuclear
Speaker 1: powered subs built on a modified British design but with
Speaker 1: American parts. Before the new subs are commissioned, though the
Speaker 1: US could either sell Virginia class subs to the Australians
Speaker 1: or just based nuclear subs in the country. Reactions still
Speaker 1: coming in over the surprise announcement Friday that China had
Speaker 1: broken the deal between Iran and Saudi Arabia, which reopened
Speaker 1: diplomatic ties between the two countries. House Intelligence share Mike
Speaker 1: Turner blames the Biden administration for China possibly becoming the
Speaker 1: power broker in the Middle East instead of this administration
Speaker 1: stepping forward and being a partner to Saudi Arabia our
Speaker 1: ally and working with them to defend themselves against tax
Speaker 1: from Iran. They subject Saudi Arabia's a significant amount of criticism,
Speaker 1: and we're slow to react and respond to the militarian
Speaker 1: needs of Audirabia. So it's not unexpected that they might
Speaker 1: look elsewhere for support. It certainly is very unexpected and
Speaker 1: certainly very troubling and disappointing that they would turn to Iran.
Speaker 1: The Republican from Ohio was speaking to ABC News Iran
Speaker 1: says that they have a deal in place to buy
Speaker 1: SU thirty five fighter jets from Russia, which would significantly
Speaker 1: upgrade their aging fleet of jets. US and British officials
Speaker 1: are concerned that the transfer of the aircraft could be
Speaker 1: as part of a quid pro quo for Iran sending
Speaker 1: kamikaze drones, which Russia has used in Ukraine. Currently around
Speaker 1: flies a small fleet of aging US and Russian jets
Speaker 1: acquired before the Islamic Revolution back in nineteen seventy nine.
Speaker 1: Eight people are dead and seven are missing after two
Speaker 1: boats collided off of San Diego late last night. Officials
Speaker 1: believe the two Panga boats were involved in smuggling. Both
Speaker 1: the San Diego Fire and Police departments, along with the
Speaker 1: US Coastguard and Customs in Border Protection, continue to search
Speaker 1: for the missing, but some believe that some may have
Speaker 1: escaped on the beach, located about fifteen miles north of
Speaker 1: San Diego. If I've done something here, just tell me
Speaker 1: what I don't you but you didn't send to me?
Speaker 1: Well that's what I was thinking, Like, I just don't
Speaker 1: like you no more? Do you like me? Yesterday? That,
Speaker 1: of course is Colin Farrell and Brendan Gleeson, two actors
Speaker 1: up for big Awards tonight. It's the ninety fifth Academy Award,
Speaker 1: hosted by Jimmy Kimmel. Everything Everywhere, All at Once leads
Speaker 1: away eleven Oscar nominations right behind All Quiet on the
Speaker 1: Western Front and Banshees in a Shearing which you just heard,
Speaker 1: with nine nominations, including Colin Farrell, who's happy to be
Speaker 1: nominated for Best Actor amongst all the other nominations for
Speaker 1: the film. It's really lovely and it's just feel very
Speaker 1: smoiled to have this moments in such a shared environment.
Speaker 1: It feels like a really much more communal experience than
Speaker 1: it might have otherwise. History could be made as Michelle Yoe,
Speaker 1: the star of Everything, Everywhere, All at Once, could become
Speaker 1: the first Asian woman to win Best Actress. Global News
Speaker 1: twenty four hours a day, powered by more than twenty
Speaker 1: seven hundred journalists and analysts in over one hundred and
Speaker 1: twenty countries on Dan Schwartzman and this is Bloomberg. I'm
Speaker 1: Brian Curtis here in Hong Kong alongside Rashad Salama, and
Speaker 1: our guest is Kim Forrest, founder and Cio at Boukaya
Speaker 1: Capital Partners kim, it's going to be about credibility today.
Speaker 1: Silicon Valley Bank was a pretty good sized bank, was
Speaker 1: the eighteenth biggest bank before all of this hit, and
Speaker 1: for many people the fact that a bank that size
Speaker 1: could go bust in a couple of days will send
Speaker 1: shockwaves through depositors. I'm wondering if you think this morning
Speaker 1: here in Asia that we might expect some kind of
Speaker 1: a run on the banks to happen, Well, that's a
Speaker 1: definite Maybe. I think people are rattled. I think there
Speaker 1: are there is a group of people in the world
Speaker 1: that have been looking for fallout from all of the
Speaker 1: I would say whip last reaction to COVID. Right, So
Speaker 1: we brought rates down almost immediately upon the lockdown, and
Speaker 1: you know, the US government was trying to ameliorate the
Speaker 1: effects of shutting down, you know, our entire economy. And
Speaker 1: then the FED taking the actions that they thought was
Speaker 1: needed last year to raise the interest rate from pretty
Speaker 1: much zero to four plus percent, right. I mean, these
Speaker 1: are really whiplash moves, and I think we found out
Speaker 1: where some of the breakage is coming. But again, I
Speaker 1: think there's people that are afraid, and no bank can
Speaker 1: sustain a run on the bank if there's a sufficient
Speaker 1: number of people. Because banks are in the business of
Speaker 1: lending out money. They don't just put your you know,
Speaker 1: your money in cash and leave it there. They can't.
Speaker 1: They have to make money off of your money, so
Speaker 1: at a minimum they must put it to work. And
Speaker 1: if everybody wants their money all at the same time,
Speaker 1: that bank is not going to survive. It's got some
Speaker 1: headlines as you came coming through something US SVB deposits
Speaker 1: will have access to all money Monday saying signature bank
Speaker 1: closed today by state authority. Those are some lines. I
Speaker 1: can't really flesh those out fegure at the moment, but
Speaker 1: you know, as a quantitative tighting continues, we've seen reserves
Speaker 1: actually continue to fool and argue seem deposits to Now
Speaker 1: it's worth noting in the past year that banks have
Speaker 1: been increasing their borrowing and that makes the question, if
Speaker 1: there's so much excess liquidity around, why the need Well,
Speaker 1: I don't think it's the need. I think again, this
Speaker 1: was the reality of two thousand or twenty twenty one
Speaker 1: when the government and twenty twenty when the government shoved
Speaker 1: tons of money out there for businesses, the PPP loans,
Speaker 1: and it had to go somewhere, and the banks again
Speaker 1: have to do something without money, and nobody was really
Speaker 1: borrowing money at that time, so they bought treasuries and
Speaker 1: they probably did it of relatively short duration. They weren't
Speaker 1: probably out there buying thirty years. They were buying four
Speaker 1: or two years probably, you know, among others. And again
Speaker 1: this is a math problem where the price of those
Speaker 1: two year notes have fallen as rates have risen dramatically,
Speaker 1: And this is exactly the kind of fallout that I
Speaker 1: think the said did not anticipate. I mean, nobody sat
Speaker 1: down with a pencil and paper and figured it out. Yeah,
Speaker 1: we're seeing a run to haven assets this morning. No
Speaker 1: doubt this will be very, very good for US treasuries.
Speaker 1: But it does beg the question where would it be
Speaker 1: in the belly of the curve. You certainly probably wouldn't
Speaker 1: want to be buying ten year securities here. But as
Speaker 1: more value comes into the market there, those yields will
Speaker 1: drop and that eases some of the pressure, right, And
Speaker 1: you know it could I hate to be overly optimistic,
Speaker 1: you know, people running for safety might just solve the problem.
Speaker 1: And again this is all not linear problems. It doesn't
Speaker 1: scale one for one, So it doesn't take everybody withdrawing
Speaker 1: their money out of a bank to kill it, nor
Speaker 1: does it take everybody buying treasuries to make the price
Speaker 1: go up. But it is some small number, like I
Speaker 1: don't know, maybe twenty percent of unusual activity that may
Speaker 1: just reset these bonds much lower and thus even stop
Speaker 1: people from thinking about, well maybe I should buy that CD,
Speaker 1: you know, and taking action if the price falls precipitously. Well,
Speaker 1: I suppose everybody, everybody over the weekend was probably you know,
Speaker 1: reconciling all of their accounts under two hundred and fifty
Speaker 1: thousand for sure. Yep. But this is I think this
Speaker 1: is what the government is really trying to stop, is
Speaker 1: mass movements of money. That is what they're trying to stop.
Speaker 1: Good luck, all right, So what do you think they
Speaker 1: should do next? Hig him? Well, I think probably something
Speaker 1: I'm concerned about, because I like to think further into
Speaker 1: the future, is if people at Silicon Valley Bank, and
Speaker 1: people I mean corporations because largely it was a business bank,
Speaker 1: not a person a retail bank. So if they can't
Speaker 1: get their hands on their money to pay their client
Speaker 1: or their employees. You know, now things really start to fail.
Speaker 1: And I think that's really what the government is signaling
Speaker 1: that if you're a depositor and you need to get
Speaker 1: your money out to pay people, of course we're going
Speaker 1: to like figure this out and try to make it happen.
Speaker 1: And I think that is key in making people not
Speaker 1: run on other banks as well. It's amazing, isn't it
Speaker 1: that the US jobs report now is a distant memory.
Speaker 1: I know, I know, and we can't even get into
Speaker 1: that crazy. It's not really a conspiracy theory, but I
Speaker 1: think there was a lot of conflicting data in this
Speaker 1: one that makes me think maybe the half million jobs
Speaker 1: that they say are created are more of a function
Speaker 1: of somebody trying to smooth out and seasonally adjust that data.
Speaker 1: And maybe you know, the employment picture isn't quite as strong,
Speaker 1: but things are going in the right direction for a
Speaker 1: cooling economy. Not a cold economy, not a rock falling economy,
Speaker 1: but you know, a calming down economy. You know, the
Speaker 1: wage rates were lower and unemployment was higher. Oh kim, Okay,
Speaker 1: with everything that's going on right now, is cash your
Speaker 1: best option for what I meant under your mattress. Now,
Speaker 1: I think that's a terrible idea. No, I don't think
Speaker 1: cash is your best option. I think what you need
Speaker 1: to do is always always be looking at equity markets.
Speaker 1: If a quality company, and I do mean quality, I'm
Speaker 1: talking you know somebody that does not bank at Silicon
Speaker 1: Valley Bank. I'm being glib, but really an older kind
Speaker 1: of company that has steady earnings, that has good management
Speaker 1: and has plans for the future and product marketing sort
Speaker 1: of processes. If you can identify those and buy them
Speaker 1: when they're on sale when people are panicking, and hold them,
Speaker 1: you are going to benefit in the long run, and
Speaker 1: by that I mean three to five years. This is
Speaker 1: Bloomberg Daybreak Asia, your morning brief on the stories making
Speaker 1: news from Hong Kong to Singapore and Wall Street. Look
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