[ET Net News Agency, 29 January 2021] Goldman Sachs believe an economic recovery in HK
has the potential to accelerate loan growth starting in 2H 2021. The research house cited
three reasons that support its view.
First, improving demand: Macro indicators are currently depressed but are expected to
improve to strong positive numbers during the course of the year. This would improve the
financial performance of borrowers and make the case for banks to lend.
Second, ready supply: Banks are sitting on excess capital, a very liquid balance sheet
position but with a tight stance towards lending currently acknowledging the weak macro
backdrop.
Last, rate gap as a catalyst: The onshore-offshore interest rate gap has opened up to
2.4%, the widest since 2018. This could incentivise the China corporate to borrow from HK
(instead of China). Goldman sees a tight positive relationship between the rate gap and
loan growth for HK banks. It revised its target prices for the HK banks it covers as
follows:
Name Rating Target Price
--------------------------------------------------------------
HSBC Holdings (00005) Buy HK$59.00 from HK$52
Standard Chartered (02888) Buy HK$62.00 from HK$55
BOC Hong Kong (02388) Buy HK$34.90 from HK$31.1
Seng Bank Bank (00011) Buy HK$170.00 from HK$150
Bank of East Asia (00023) Neutral HK$17.20 from HK$15.1
Dah Sing Banking (02356) Neutral HK$9.40 from HK$8.6

(KL)