Key lenders likely to hold sway in investors’ minds

Surging nearly 300 points in early trading, the benchm a r k i n d i c a t o r o f Ho n g Kong stocks broke through the so-called psychological barrier of 23,000 points on Wednesday like a hot knife through butter.

Citing renewed investor confidence, many stock analysts have raised the next resistance level for the Hang Seng Index at 23,500 points or even higher. The market rally that started early this year has been supported by increased average daily turnover, indicating a sustained rise in buying interest.

Leading the charge on Wednesday were major bank stocks, with their fortunes lifted by projected rapid and big increases in interest rates. HSBC — the city’s largest financial institution and one of the most heavily weighted index constituent stocks — surged more than 1 percent in heavy trading to nearly HK$65 apiece, and analysts have set the lender’s target price at HK$70.

Other bank stocks, including Bank of China (Hong Kong) and HSBC subsidiary Hang Seng Bank, which concentrates on local business, also made substantial gains.

After some 10 years being shunned by investors, banks returned to the market lime- light late last year as they were seen to be in a position to benefit most from rising interest rates which could help widen their profit margins in the lending business. The expansive budget policy proposed by US Presidente l e c t D o n a l d Tr u m p h a s been widely seen as inflationary which, in turn, could add pressure on the US Federal Reserve to raise interest rates with greater vigor than before.

Such expectations gained renewed credence after comments by a Fed policy maker earlier this week, that have lifted investor interest in bank stocks in the US and Hong Kong.

Among the Hong Konglisted banks, some analysts are pushing for those with exposure to the global, particularly the US and European, markets. They include HSBC and Standard Chartered, which had a great run earlier in the week.

Others, however, warned of the uncertainties facing global financial marke ts. They contended that banks that are more focused on the Hong Kong market, particularly Bank of China (Hong Kong) and Hang Seng Bank, are better buys.

If you’re attracted by the global growth potential and local market predictability, then, perhaps, HSBC would be your best bet.