Photographer: Chan Long Hei / Bloomberg
Photographer: Chan Long Hei / Bloomberg
Hong Kong investors find refuge in the city’s banking stocks, from Chinese telecommunications companies to Tencent Holdings Ltd. it becomes toxic.
Financial stocks outperformed other sectors of the Hang Seng benchmark on Thursday. HSBC Holdings Plc was the largest contributor to the index with a gain of 4.6%, following the 10% concentration in London the day before. Standard Chartered Plc rose 6.9%. On the other hand, Alibaba Group Holding Ltd. fell 3.9% and Tencent fell 4.7%, after reporting that the Trump administration could ban investments in two of the most valuable companies in the world.
“People are changing their money, there are now so many problems and uncertainties for growth stocks,” said Dickie Wong, executive director of research at Kingston Securities Ltd, adding that banks currently offer a refuge for recent regulatory and political tensions.
One of the factors behind recent gains for HSBC and others is the jump in the performance of US sovereign banknotes, with the ten-year rate this week rising to the highest level since March. Financial firms have suffered from low interest rates and quantitative easing from central banks around the world that have suppressed bond yields at virtually every maturity. Loans tend to be more profitable for banks when yield curves shrink or bond yields with a longer date become higher than those with shorter maturity debt.
“The steep yield curve creates a good environment for banks like HSBC,” said Alex Wong, asset management director at Ample Capital Ltd. 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. According to its October earnings update, revenue for this measure fell 6%. The bank said at the time that prolonged low interest rates would likely have a “significant impact” on its net interest income.
Shares sentiment also improved as investors plan to repurchase shares this year, Wong said of Ample Capital. HSBC could spend up to $ 3.5 billion between this year and next, according to a recent investigation Goldman Sachs note.
HSBC has risen 54% in Hong Kong since it hit its 25-year low in September. The rebound follows months of uncertainty for the lender, as investors were concerned about how regulatory, economic and geopolitical pressures would affect it. Since then, hopes that a change in the U.S. presidency will ease tensions between Washington and Beijing and signs that British regulators will soften their stance on the dividend ban have helped fuel optimism.
– With the assistance of Tian Chen and Sofia Horta e Costa
(Updates with closing prices)