Will The SVB Bankruptcy Affect Us
Mar 17, 2023| Will the SVB bankruptcy affect us?
The well-known Silicon Valley Bank in the technology field went bankrupt, and more seriously, several American banks followed suit. The waves of the financial industry shock have been rippling all the way to China. Reminiscent of the current market predicament, many people worry whether this will be the beginning of another financial crisis after 2008.
China Merchants Securities also analyzed this in a research report a few days ago, arguing that the fundamental reason for the Silicon Valley Bank incident was insufficient liquidity. Some liquidity indicators such as the TED spread (the difference between the 3-month US dollar London interbank market rate and the US bond yield) have given forecasts in advance. Behind this is of course the impact of the Federal Reserve's financial policy. Therefore, the research report of China Merchants Securities believes that the bankruptcy of Silicon Valley Bank may promote the reversal of the Fed's policy. "At the end of 2023, the Fed may turn to cut interest rates. The main reason is that rapid and large interest rate hikes will inevitably trigger an economic recession or a liquidity crisis. The current run is the price before the end of this round of the Fed's tightening cycle. The market is already pricing the end of the Fed's monetary policy tightening cycle. If the Silicon Valley Bank incident continues to simmer or force the Fed to change its policy, the Fed must first see a "bad news" before it can have good news. In addition to the cooling of the job market and large fluctuations in the financial market, the continued instability of the banking system will also become a problem for Powell and others. One of the "bad news" that policymakers need to turn to. At present, the bank run is still brewing, and the possibility of further triggering a liquidity crisis cannot be ruled out. But the degree of liquidity crisis is also different: when the highly leveraged field is limited to financial The power of wind risk is limited when assets are not involved in real estate, which is the case now. In any case, March is a "dangerous" month, and there will be "opportunities" in April (middle). The same is true for domestic."
Therefore, in the view of China Merchants Securities, the bankruptcy of Silicon Valley Bank is not enough to be compared with the sudden financial crisis in 2008. It is more the result of repeated monetary policies of the Federal Reserve, especially the rapid disposal of the US regulatory authorities to support all deposits. , and the customers of the bankrupt banks such as Silicon Valley Bank this time are mainly some start-up companies, unlike the case in 2008 that involved real estate and other basic industries.
From this point of view, the current financial turmoil will not have much impact on our optical communication industry. After the market comes out of the panic, the economy will stabilize again. The current market contraction is more likely to be a temporary manifestation of a change in financial policy. In contrast, the more serious problem is the impact of the de-Chinese procurement of North American customers.