HSBC, Bank of China at multi-month highs show fund managers love banking stocks as margins, dividends add to gloss
- HSBC and peers are rallying as money managers waste no time in picking up banking stocks on outlook for wider lending margins and dividend yields
- JPMorgan sees higher dividend payouts from HSBC in the coming years as margins improve along with stock buy-back programme
Tighter monetary policy, underpinned by a surprise rate rise in the UK and signs of faster rate increases in the US, has brightened the outlook for earnings with margins forecast to expand. Generous dividends may be sustainable as governments put the pandemic under control.
HSBC, the most valuable lender globally which derives 53 per cent of its revenue from Asia, appreciated 6.8 per cent in the opening week of the new year, sending it to a 22-month high and steadying the Hang Seng Index. The momentum has also lifted Bank of China to a seven-month high, while Standard Chartered fetched the highest since mid-November.
“Banks are among those low-valuation stocks and their values stand out amid expectations about [global] liquidity tightening,” said Wang Chen, a partner at Xufunds Investment in Shanghai. “They also look attractive in terms of the outlook of dividend payouts and yields.”
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Wang has added some Hong Kong-listed banks through exchange-traded funds over the past few months, without naming any specific lenders.
The run-up suggests global funds are favouring old-economy bellwethers again to safeguard against tech-stock volatility. A slump in Chinese technology juggernauts abetted a 14 per cent drop in the Hang Seng Index in 2021, the worst performer among major global benchmarks.
