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Analysis:
The slide in U S bank stocks this week appeared to catch traders in the options market by surprise, data shows, raising questions over whether bank investors have become a little too comfortable with the sector that only months ago was in crisis U S bank shares dropped on Tuesday after ratings agency Moody s downgraded credit ratings of several U S regional lenders and placed some banking giants on review for potential downgrade
It warned lenders will find it harder to make money as interest rates remain high, funding costs climb and a potential recession looms It also cited some lenders exposure to commercial real estate as a risk The warning caught some investors off guard
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A day before, options traders expectations for near-term swings in the shares of two major sector exchange-traded funds (ETFs) – SPDR S&P Bank ETF (KBE P) and SPDR S&P Regional Banking ETF (KRE P) – hit the lowest level since the collapse of Silicon Valley Bank in March signaling little investor concern about the sector s outlook data from Cboe s options analytics service Trade Alert showed
On Tuesday SPDR S&P Regional Banking ETF s (KRE P) options-based 30-day implied volatility rose to 31 1%, up from 28 9% touched on Monday At 30 7% late on Wednesday that gauge of how much traders expect the shares to gyrate still remains well below the high of 82% touched in March Investors appear to have made their peace with risks in the sector and were not focused on defensive positioning, either because they had already shed banks exposure, or were not very concerned about fresh bad news said Steve Sosnick chief strategist at Interactive Brokers There s not nearly as much risk being priced in he said With some 1 5 put options open against each call option, as of Wednesday, positioning is less defensive than it has
The collapse of three mid-sized U S banks earlier this year and record deposit outflows from smaller lenders sparked investor concerns about the broader banking industry but no further bank failures and resilient economic data have helped shore up investor sentiment since May Still, risks linger, including exposure to the commercial real estate office sector which has been hurt by lingering pandemic vacancies and high interest rates and the growing cost to retain flight of deposits Commercial real estate is one of the focal points for investors
China decries US ‘economic coercion’ over investment ban, vows ‘necessar y’ countermeasure
China on Thursday scathingly criticized the US government s move to ban new US investment in key technology industries in China the latest attempt in Washington s relentless crackdown campaign against China China has lodged stern representations with the US side and vowed to take necessary measures to safeguard its interests While US officials cited the so-called national security reasons for the executive order and maintained that the US does not seek to decouple from China Chinese officials and experts said the latest US move is part of the US illintentioned campaign to contain China s technological rise, which amounts to “economic coercion” and violates basic market principles
The exact impact of the US ban remains to be seen but Chinese tech industry insiders and analysts dismissed any so-called chilling effect hyped by foreign media noting that the move has long been publicized by US officials and that US investments in the Chinese technology industry have already declined amid years of the US tech crackdown Most importantly the move or other arbitrary restrictions by the US will not derail China’s pursuit of technological self-reliance and strength analysts said After weeks of media hype and speculation US President Joe Biden on Wednesday US time signed an executive order to ban new US investments
