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 upward move in rates has prompted local banks to raise their main lending rates to clients, which can help improve their margins. The Hong Kong interbank offered rate, known as Hibor, has been catching up with its US counterpart recently after lagging behind amid the Federal Reserve’s rate hiking cycle.
“The market is missing an expected improvement in net interest margins” as lenders’ shares have not reacted to the higher rates, analysts including Gurpreet Singh Sahi wrote in a Thursday note.
The brokerage affirms its buy ratings on HSBC Holdings Plc and BOC Hong Kong Holdings Ltd. with price targets implying more than 30% upside from current levels.
The surge in Hibor, which jumped to a 16-year high on Thursday, came amid tightening liquidity conditions after the city’s repeated currency intervention to support the local dollar. Earlier this month, HSBC, the financial hub’s biggest lender, increased its Hong Kong dollar prime rate to 5.75% per annum, a move that has been followed by its peers.
Shares of some local lenders, such as BOC Hong Kong and Hang Seng Bank Ltd., have fallen from recent peaks, outpacing losses in the broader Hang Seng Index. They slid further Friday amid a broader market pullback.
The interbank borrowing costs eased across the curve on Friday. 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.
–With assistance from Chester Yung.
(Updates throughout)
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