Recently, investors are concerned about Hong Kong banks' exposure to NEW WORLD DEV (00017.HK)  +0.060 (+1.307%)    Short selling $4.42M; Ratio 12.300%   , HSBC Global Research said in its report. The broker's credit analyst currently estimates that NWD's capital structure may not improve rapidly, yet banks will not immediately regard it as a potential default entity.

In addition, the broker believed that most of NWD's borrowings were drawn in Hong Kong given that around 86% of its interest-bearing liabilities are denominated in HKD and USD. Among the banks covered by the broker, BOC HONG KONG (02388.HK)  +0.550 (+1.634%)    Short selling $78.03M; Ratio 10.695%   is projected to have larger exposure than its peers because of its larger exposure to property development loans.

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As a base case, the broker predicted that Hong Kong banks will not classify their exposure to NWD as non-performing loans (NPLs) by end-2024 nor end-2025. If banks are willing to provide refinancing, it is believed that NWD will have time to divest some assets and gain shareholder support.

In the bear case scenario, if NWD's credit rating had to be downgraded, the NPL ratio in the banking system would rise by 1.3 ppts to 3.3%. Assuming banks make provisions for 50% of new NPLs within two years, the estimated negative impact on the annual earnings of BOC HONG KONG and BANK OF E ASIA (00023.HK)  +0.020 (+0.178%)    Short selling $4.23M; Ratio 48.831%   would be approximately 11% and 24% respectively.
(HK stocks quote is delayed for at least 15 mins.Short Selling Data as at 2025-06-06 16:25.)