Asia Pacific markets dip after UBS rescue of Credit Suisse

Hong Kong CNN  — 

Asia Pacific markets edged slightly lower on Monday morning as investors reacted to news of a Credit Suisse bailout by its bigger rival UBS.

In Hong Kong, the Hang Seng Index (HSI) tumbled 1.5% at its opening.

Japan’s benchmark Nikkei (N225) index fell 0.7%, while South Korea’s Kospi (KOSPI) was flat in morning trade. The S&P/ASX 200 in Australia slipped 0.8%.

On Sunday, Switzerland’s biggest bank, UBS (UBS), agreed to buy Credit Suisse (CS) in an emergency rescue deal aimed at stemming financial market panic unleashed by the failure of two American banks earlier this month.

The Swiss National Bank said in a statement that the rescue would “secure financial stability and protect the Swiss economy.”

On Monday, Hong Kong’s de facto central bank and securities regulator joined the chorus of central banks in welcoming the announcement from Zurich and sought to reassure the public that business would continue as usual.

“The exposures of the local banking sector to Credit Suisse are insignificant,” the Hong Kong Monetary Authority (HKMA) said in a statement, adding that the assets of Credit Suisse’s local branch were worth approximately 100 billion Hong Kong dollars ($12.7 billion) or “less than 0.5% of the total assets of the Hong Kong banking sector.”

The lender’s customers in the city will be able to “continue to access their deposits with the branch and trading services” as normal, the HKMA added. “Their overall exposures to the Hong Kong market are not significant.”

In Australia, Christopher Kent, the assistant governor of financial markets at the Reserve Bank of Australia (RBA), also weighed in, noting the recent strain on investors.

“Volatility in Australian financial markets has picked up,” he told a conference Monday. “But markets are still functioning and, most importantly, Australian banks are unquestionably strong — the banks’ capital and liquidity positions are well above [regulators’] requirements.”

UBS is paying 3 billion Swiss francs ($3.25 billion) for Credit Suisse, about 60% less than the amount the bank was worth when markets closed on Friday.

US stock futures rose on Sunday night following the news. Dow futures and S&P futures each rose 0.6%, while Nasdaq futures ticked up 0.4%.

That followed another day of losses on Wall Street on Friday, as investors continued to fret over the health of the global banking sector. The Dow (INDU) fell 1.2%, and the S&P 500 (SPX) shed 1.1%. The Nasdaq Composite (COMP) dipped 0.7%.

— CNN’s Mark Thompson contributed to this report.