Boost for Hong Kong's bankers

HONG Kong's banks swung into focus today as investors zeroed in on the forthcoming results season.

Much better second-half numbers are expected when the earnings parade begins in earnest tomorrow as Bank of East Asia (BEA), the territory's fifth-largest lender, lifts the veil on its figures.

As lessening concern about the impact of avian flu provided an additional lift, shares in BEA strode forward 75 cents or 3% to HK$25.35.

Although it has made limited headway in the past three months, the stock is up by two-thirds over the past year.

The over-arching story behind the results will have two different strands. On the cyclical front, the just-completed second-half was better than the year-ago period as Hong Kong's economy shows clear signs of a sustainable recovery.

On top of that, the second half of last year stands in rosy contrast to the first half, which was shot through with the disruption caused by the Sars virus.

Analysts polled by Reuters reckon that BEA will report net profit of HK$857.5m (£59.8m) in the six months under review. That is 66% better than the second half of 2002, and 8% better than the first half of last year.

The recent pick-up in economic momentum means that BEA - and its peers - should be able to lower the amount of provisions it sets aside for bad or doubtful debts. Rising property prices - after years of decline - should also provide an extra boost.

Economists expect that Hong Kong's trade-dependent economy should expand by more than 5% this year. Booming China and the local revival should combine to rev up growth in the former British colony.

Among blue-chips, the other lenders were also up on the day. Global player HSBC, which is dual-listed in London, put on HK$1.50 or 1.2% to HK$123.50, while its affiliate Hang Seng Bank traded at HK$107, better by 50 cents or 0.5%. The pair will report their earnings on 1 March.

Bank of China (Hong Kong), the local arm of the giant mainland bank, gained 75 cents or 3% to HK$25.35. The 33-member Hang Seng index strengthened 153.45 points or 1.2% to 13,463.05.

'It pays to look at which sectors are lagging. The one that stands out is the banks,' ING said today.

'The loan-to-deposit ratio in Asia currently stands at 0.7 times. Think of it as a form of capacity utilisation. Basically, banks are running at 70% of their stated capacity. Back in 1997, the same ratio was 112%.'

Clothing retailer Esprit, which will also report tomorrow, was stronger ahead of its results. It bolted HK$1.15 higher to HK$27.80, an advance of 4.3%.

In Tokyo the game was all about whether the weekend G7 statement would succeed in adding some spine to the greenback, thus weakening the yen and aiding exporters.

After an initial spurt on hopes that it might, doubts set in. Toyota fell 40 yen or 1.1% to 3510 and rival motor company Nissan eased one yen to 1094.

Amid uncertainty about its desire to bid this week for AT&T Wireless, the US mobile company, shareholder NTT DoCoMo dropped 6,000 yen or 2.8% to 211,000. The Nikkei 225 fell by 58.31 to close at 10,402.61.

The Australian market pushed ahead after US gains on Friday. With media group News Corporation up 15 cents at A$11.88, the All Ordinaries rose by 15 points or 0.46% at 3300.0.

FAR EAST