Stock investors are in danger of missing a buying opportunity from the recent surge in Hong Kong’s interbank rates, according to Goldman Sachs Group Inc.
(Bloomberg) — Stock investors are in danger of missing a buying opportunity from the recent surge in Hong Kong’s interbank rates, according to Goldman Sachs Group Inc.
“The market is missing an expected improvement in net interest margins” as lender’s shares have not reacted to the higher rates, analysts including Gurpreet Singh Sahi wrote in a Thursday note. Still, delivery from banks is key given their first-quarter miss on margins, they added.
The overnight Hong Kong interbank offered rate, known as Hibor, jumped to a 16-year high on Thursday amid tightening liquidity conditions after the city’s repeated currency intervention to support the local dollar. Still, the borrowing costs eased across the curve one day later. The one-month Hibor, the main reference for the city’s mortgage rate, fell 19 basis points to 4.34% on Friday after gaining for 16 consecutive days, while the overnight rate eased 26 basis points to 4.54%.
The recent increase in Hibor has prompted local banks to raise their main lending rates to clients. Earlier this month, HSBC Holdings Plc, the city’s biggest lender, increased its Hong Kong dollar prime rate to 5.75% per annum. Standard Chartered Plc and Bank of China (Hong Kong) also announced they would raise their prime rates.
Stocks of some local lenders, such as BOC Hong Kong Holdings Ltd. and Hang Seng Bank Ltd., have fallen from recent peaks, outpacing losses in the broader Hang Seng benchmark index.
Goldman affirms their buy ratings on HSBC Holdings Plc and BOC HK, the analysts wrote in the note, with price targets implying more than 30% upside from current levels.
–With assistance from Chester Yung.
(Updates latest Hibors in the third paragraph, add background of prime rate in the fourth paragraph)
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