Photographer: Chan Long Hei / Bloomberg
Photographer: Chan Long Hei / Bloomberg
Investors in Hong Kong take refuge in the city’s bank shares, as everything from Chinese telecommunications companies to Tencent Holdings Ltd. becomes toxic.
Financial stocks outperformed all other sectors on the Hang Seng Index on Thursday. HSBC Holdings Plc was the largest contributor to the index with a 4.6% increase after its 10% rally in London the previous day. Standard Chartered Plc increased by 6.9%. On the other hand, Alibaba Group Holding Ltd. Down 3.9% and Tencent down 4.7%, after reports that the Trump administration may be barring investments in two of the world’s most valuable companies.
“People are moving their money, there are currently so many problems and uncertainties for growth stocks,” said Dickie Wong, executive director of research at Kingston Securities Ltd, adding that banks are currently a haven for recent regulatory and political tensions.
One factor behind recent gains for HSBC and others, is a boost in returns on U.S. sovereign notes, with the 10-year rate this week climb to the highest level since March. Financial corporations have suffered as a result of low interest rates and quantitative easing from central banks around the world, the yields of bonds in virtually all maturities. Borrowings usually become more profitable for banks as the yield curves become stronger, or as the yields of longer bonds become higher against the debt in the shorter term.
“The rising yield curve is creating a good environment for banks like HSBC,” said Alex Wong, director of asset management at Ample Capital Ltd. ‘After the recent upswing, there is still room for HSBC to rise further, as the share price was also too much. low and investors are now betting on economic recovery. ”
HSBC’s net interest margin – a key measure of loan profitability – was just 1.2% in the third quarter of last year, down 13 basis points from the previous period. Revenue from the benchmark fell 6%, according to the October revenue update. The bank said at the time that long-term low interest rates were likely to have a significant impact on its net interest income.
Sentiment towards the stock has also improved as investors repurchase shares this year, Wong of Ample Capital said. According to recent research, HSBC could spend up to $ 3.5 billion note from Goldman Sachs.
HSBC is up 54% in Hong Kong since reaching its 25-year low in September. The rebound follows months of uncertainty for the lender, as investors worry about the increasing regulatory, economic and geopolitical pressures it would affect. Since then, hopes that a change in the US presidency will ease tensions between Washington and Beijing, and the signs that British regulators will soften their stance on a dividend ban, have fueled optimism.
– With the help of Tian Chen and Sofia Horta e Costa
(Closing price updates)