Market Prognosis

A concise summary of the major macro events of the past 24 hours, and selected UK company-specific news.

March 13, 2023

All About SVB

Macro & Overnight

Today’s only financial market story is the demise of Silicon Valley Bank and the potential for contagion. 

Immediate market reaction has been risk-off. Precious metals and bitcoin prices are up, while the US$ and bond yields are lower. 

We are due interest rate decisions from ECB this Wednesday and the Fed next Wednesday. 

The bond market is saying that rates will go on hold. 

HSBC has bought SVB UK for £1. 

SVB was an over-concentrated but poorly managed bank that failed to protect its balance sheet against rapidly rising interest rates. SVB’s collapse is a containable credit event if they take the correct policy steps. It is a significant test for the Federal Reserve, which has mandates to fight inflation and maintain financial stability. In conjunction with the US Treasury and the FDIC, the Fed has sought to protect depositors, although not shareholders and certain unsecured creditors. (See here for HypernormalTimes post).  

 

UK Company News

Today, UK company RNS announcements are dominated by declarations about exposures to SVB. These fall into three broad categories: those with no exposure, those with limited manageable exposure, and those who have suspended dealings in their shares. (The lists below are not exhaustive). 

No Impact 

FX providers Alpha Group, Argentex, and Equals said they had no direct exposures.  

Some Impact 

Ad tech company Dianomi has about £4m out of its nearly £10m held mainly in SVB UK accounts. 

Professional training provider Learning Technologies has about 10% of its £110m cash on deposit with SVB UK. 

Online win retailer Naked Wine Group has £14m out of £32m held in a cash sweep account with SVB. 

Other companies with debt facilities but limited or no cash deposits with SVB include Trustpilot, Eagle Eye, Future and RWS.  

Shares Suspended 

Healthcare-related companies, Diaceutics and Polerean Imaging, have both had their shares suspended, as most of their cash holdings are on deposit with SVB entities.  

Prognosticator 

 

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