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<Research>JPM Recommends Buying HSBC HOLDINGS/ STANCHART Assuming Their EPS May Drop 10%/ 14% on Middle East Exposure
Recommend 30 Positive 55 Negative 42 |
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The stock prices of HSBC HOLDINGS (00005.HK) and STANCHART (02888.HK) have both experienced corrections this month, reflecting investor concerns about the impact of Middle East conflicts and private credit exposure risks, according to JPMorgan's research report. Assuming that credit losses from Middle East loan exposure will lead to increased impairment expenses, and that global macro risks will result in additional credit costs, coupled with earnings losses from Middle East operations and losses from private credit exposure, JPMorgan expects that HSBC HOLDINGS may see a 10% decline in its EPS and a 180 bp drop in return on tangible equity in 2026, while STANCHART may see a 14% decrease in its EPS and a 184 bp slump in return on tangible equity. STANCHART is more sensitive to Middle East conflicts, while HSBC HOLDINGS has greater exposure to private credit risks. In the above forecasts, JPMorgan assumes an incremental credit cost of 5 bps of general provisions, a 10% loss rate on Middle East risk exposure (accounting for 30%), and a 20% downside risk on pre-tax profits from the Middle East region. Believing that the potential downside scenarios have been largely reflected in the stock prices of HSBC HOLDINGS and STANCHART, JPMorgan highlighted that now is an appropriate time to build positions on these stocks. The medium- to long-term investment outlook remains unchanged, with an expected total return of around 7% even under stress scenarios. JPMorgan has raised its target price for HSBC HOLDINGS from HKD165 to HKD180 and kept its target price for STANCHART at HKD270. Both stocks have received an Overweight rating. AAStocks Financial News |
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