Just now, bad news came!
At about half past ten, news suddenly came from the market that Japan would impose new restrictions on the export of chip manufacturing equipment. The Japanese government said it would impose restrictions on 23 chip-making equipment starting in July. Although they did not name China this time, they said equipment manufacturers would need to seek export licenses for all regions. After this news, the semiconductor sector took a slight dive.
On the other hand, the US banking crisis is not over. According to the latest report from Morgan Stanley, the investment bank downgraded the company's rating for the first time in seven years and slashed its price target because Schwab customers outflowed twice as fast as it expected. Previously, Schwab's share price had fallen sharply. So, how big will the impact be?
Japan is a black hand
On the morning of March 31, Bloomberg suddenly reported bearish news that Japan would impose new restrictions on the export of chip manufacturing equipment. It is reported that export restrictions on 23 types of cutting-edge chip manufacturing technology will be expanded.
According to Reuters, Japan's trade and industry minister said in a press release that export controls will be imposed on six categories of equipment used in chip manufacturing, including cleaning, deposition, lithography and etching. It did not name China as a target for the measures, saying equipment makers would need to seek export licenses for all regions.
The ministry added that its goal is to prevent advanced technology from being used for military purposes.
The export restrictions, which will take effect in July, could affect equipment made by more than a dozen Japanese companies, such as Nikon Corp. and Tokyo Electronics.
Tokyo's decision comes after the United States imposed blanket restrictions on the export of chip-making tools to China in October. However, Washington needs Japan, the other major suppliers of such equipment, to join in order for the restrictions to take effect.
The Dutch government also said in a letter to the country's parliament this month that it plans to restrict exports of chip-making equipment. The Dutch company ASML is a major supplier of advanced lithography machines.
Japan and the Netherlands agreed in January to join the U.S. in restricting exports of chip-making equipment to China, although Tokyo never publicly acknowledged that an agreement had been reached, the sources said earlier.
Affected by this news, this morning, the semiconductor sector dipped slightly.
So, how big will the impact be? According to the data, the Japanese company Renesas is the world's important supplier of automotive-grade MCUs, SoCs and other chips, Shin-Etsu Chemical and Japan Katsugao are the world's top 2 silicon wafer companies, and Shin-Etsu Chemical also occupies an important market share in photoresist production. Japan has limited the supply of photoresist to Chinese mainland fabs due to the earthquake, and the demand for localization of semiconductor materials and automotive chips has become stronger under the background of the shortage of automotive chips and the strong demand for wafer manufacturing materials.
Another big thunder to explode?
From the current situation, everything seems to have a source, and that is the United States. On the one hand, the suppression of the industrial chain in the United States has pushed up inflation, and on the other hand, the Fed's interest rate hike has created a crisis. It is reported that the current crisis may not be over, and there is another thunderbolt.
According to media reports, according to the latest report released by Morgan Stanley, because Charles Schwab customers outflow twice as fast as it expected, this prompted the bank to downgrade the latter's rating for the first time in seven years and slash its target price.
Morgan Stanley analyst Michael Cyprys has been bullish on Schwab shares since he first studied Schwab stock in 2016, but recently his clients have withdrawn cash too quickly, more than twice as fast as he expected, up to $20 billion a month, and he can only lower the stock from overweight to wait-and-see, and sharply cut its target price from $99 to $68.
At present, the share price of Charles Schwab, which has a market value of more than 500 billion yuan, has fallen sharply.
Schwab has neither overinvested in cryptocurrencies like Silvergate Capital and Signature Bank, nor excessively exposed to startups and venture capital like Silicon Valley Bank, according to the data. Less than 20 percent of Schwab depositors exceed the FDIC's $250,000 insurance limit, compared with about 90 percent for Silicon Valley banks. With 34 million accounts and a slew of financial advisors, the company has more than $7 trillion in assets across all operations, far more than regional institutions.
Schwab's business is not similar to that of its peers. The company operates one of the largest banks in the United States and is also the largest publicly traded brokerage, both of which are sensitive to interest rate fluctuations. Schwab bought longer-term bonds aggressively in 2020 and 2021 with low yields. This means that as the Fed begins to raise interest rates to curb inflation, paper losses rise sharply in a short period of time. But as of last March, the company had made more than $5 billion in such book losses, and by the end of the year, that figure had climbed to more than $13 billion. As the Fed raises interest rates, depositors begin withdrawing money and investing in higher-yielding assets.
Charles Schwab co-chairman and CEO Walt Bettinger said in an interview Thursday that the company can afford a massive outflow of deposits. Referring to Schwab's banking division on Thursday, Walt Bettinger said, "If all our bank deposits are lost, there is enough liquidity to cover it." Instead of selling securities to fill the funding gap in the event of a deposit flight, Schwab could collect interest on its bonds, borrow more than $300 billion from the Federal Home Loan Bank, and issue up to $8 billion a month in certificates of deposit. Companies can also take advantage of the Federal Reserve's Bank Term Financing Program (BTFP) launched after the collapse of Silicon Valley Bank.
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