Malaysian companies and Bursa Malaysia should not see a direct or major impact from the recent collapse of the Silicon Valley Bank (SVB) in the United States, said Economy Minister in the Prime Minister’s Department, Rafizi Ramli, as well as several economists.

Specifically, Rafizi said that Malaysia is not expected to experience major backlash from SVB’s shutdown because Malaysian firms do not have deposits at the bank, which primarily services major startup clients in the Silicon Valley. That said, the minister acknowledged that Malaysia may not escape completely unscathed, and could be slightly impacted by the aftereffects of the crisis.

“If the collapse drags the US banking and the capital markets temporarily, it might have some drags on us too, albeit at a much smaller scale,” Rafizi said.  

Senior analyst at Malacca Securities, Kenneth Leong also agreed that there will be marginal or no impact on businesses in Malaysia and on Bursa Malaysia. “It may trigger some indirect effects as banks (would be more careful) after this issue. Perhaps it may result in the tightening of lending or margin policies regarding crypto markets,” he said.

Similarly, the vice president of equity research for Rakuten Trade, Thong Pak Leng said that the crisis will have little impact on Bursa Malaysia, and that investors should not worry. “(There may be a) little impact, but we don’t need to worry because the US banking system is different from ours. We are stricter, hence the risks are lower,” he stressed, adding that the Malaysian banking system is highly regulated where asset quality risks are well contained.

Thong also addressed the selldown that happened on Bursa Malaysia on Monday morning, which caused the benchmark FTSE Bursa Malaysia KLCI (FBM KLCI) to fall from Friday’s close of 1,433.08 to 1,414.00 during opening time. He said that it was a knee-jerk reaction due to investors’ panic, and that “when people realise later (that there is little impact), they will buy back.”

Bursa Malaysia continued to remain lower at mid-morning today, affected by the continuous selling in heavyweight stocks led by financial services, in addition to industrial products and services.

For context, SVB – which was listed as one of the top 20 American commercial banks prior to its collapse – was shut down by regulators last Friday, days after it announced big losses. Its losses were caused by a combination of factors, including poor risk management. A subsequent bank run by its depositors further exacerbated the situation. Since then, regulators have rushed to rescue affected depositors and contain the fallout from SVB’s collapse, but the full impact on the global economy remains to be seen as global bank shares continue to plunge due to contagion fears.

(Source: The Edge Markets [1, 2])

• TAGS:
• Bursa Malaysia
• FBM KLCI
• FTSE Bursa Malaysia (FBM KLCI)
• Kenneth Leong
• Malacca Securities
• Rafizi Ramli
• Rakuten Trade
• Silicon Valley Bank
• Thong Pak Leng