[ET Net News Agency, 9 June 2020] J.P. Morgan said HK banks have rallied 17% on average
and have outperformed HSI by 9% month-to-date, driven by easing concerns about US
government measures and the regional trend of tactical value/cyclical rotation.
However, the research house does not expect material outperformance for HK banks from
current levels, as the sector should still experience a cyclical downturn in the next 6-12
months that does not support valuation re-rating.
JPM estimated deposit spreads contracted by more than 20bps QoQ in 1Q, and the declining
magnitude could be even greater in 2Q despite the slightly positive impacts of a
steepening yield curve recently.
Assuming no further initiatives by the US government, JPM believes the biggest
uncertainty left for HK banks in the next couple of months lies in the potential
resurgence of social unrest to a scale that results in a serious disruption of daily
activities in HK. (KL)