Three key themes Auquan customers were tracking this week.
US Regional Bank Outflows & SVB Contagion risk
The underlying driver for SVB collapse is the startup funding drought, married with the Fed’s policy of raising rates. There are fears of wide-spreading contagion among other regional banks after Signature Bank collapsed, and Auquan is actively tracking this theme.
- While the funding environment is unique to SVB, the market fears that SVB’s vulnerability to rising interest rates is paralleled in other banks through an over-exposure to falling bond prices.
- The recent pace and amount of interest rate hikes have left many banks with little time to reposition their balance sheets. These banks' assets are repriced MTM, creating a maturity mismatch between assets and liabilities.
- In addition, an inverted yield curve is causing depositors to move cash out of banks to money market funds offering higher rates. Banks are forced to sell some of the longer-duration assets at a steep loss to fulfil customer withdrawals.
- March 13 | Signature Bank becomes next casualty of banking turmoil after SVB
- March 12 | First Republic says its liquidity remains 'very strong in a bid to calm nerves following Silicon Valley Bank's collapse
- March 10 | Silicon Valley Bank failure rattles banking world
- March 10 | Regional Bank Stocks Drop on Sector Worries After SVB Troubles
- Mar 13 | First Republic bolsters liquidity after a wild weekend of bank failures
- Mar 10 | Who Saw It Coming? Short Sellers Were Out Front of Bank Upheaval
African Swine Fever Outbreak
African swine fever (ASF), a highly contagious and fatal disease with no cure or vaccine, has had a surge in pig farms in China, with other countries, such as Germany, also reporting cases of the disease. ASF has been spreading in several countries, including China, the world’s top pork consumer, Germany and the Philippines.
- Aside from the food industry, other industries rely on pig derivatives, such as the processing industry uses pig skin and bone for leather, glue and fertilizer and the pharma industry for gelatin and heparin.
- Smithfield Foods and WH Group have been impacted financially due to the outbreak of African swine fever.
- Germany reported another case of African swine fever from a farm of pigs on 28 February 2023.
- Singapore reported an increase in pork prices due to the outbreak on 11 March 2023.
- 15 Mar | China's pig farms battle a new surge of African swine fever
- 11 Mar | Pork prices rise amid African swine fever outbreaks
- 28 Feb | Germany reports another African swine fever case from a farm of pigs
Cough Medicine Withdrawal
Due to allergy fears, the UK government withdrew all pholcodine-containing cough and cold medicines from the market as a precautionary measure.
- Reckitt Benckiser has lost £3bn in value since the withdrawal of its product, Nurofen Plus.
- GlaxoSmithKline has seen a 3% drop in shares due to the removal of its product, Beechams All-in-One Max Strength.
- Novartis has recalled its product, Tixylix Syrup for Children.
- The Medicines and Healthcare products Regulatory Agency (MHRA) will review safety data on pholcodine before any further decisions are made on April 12th 2023.
- 14 Mar | Pholcodine cough medicines withdrawn in UK over allergy fears
- 13 Mar | Pholcodine containing cough and cold medicines: withdrawal from UK market as a precautionary measure
- 14 Mar | UK Recalls Cough Medicines After Regulator Health Warning
While you’re here…
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