StanChart benefits from HK move

THE emerging-markets lending specialist

That will help the bank trim tax liabilities, fattening its bottom line. As JP Morgan raised its rating to neutral from underweight, the shares, listed in Hong Kong since 2002, picked up 50 cents to HK$127.50.

StanChart executives have said the growing integration of the Hong Kong and Chinese economies triggered the accounting move, announced last month.

In particular, they pointed to a limited free-trade agreement between Beijing and the former British colony that allows Hong Kong entities speedier access to the mainland market. For the likes of StanChart, this is the main prize.

The numbers behind the switch are positive enough as JP Morgan lifted its forecasts for the bank's total earnings this year and next by 6% and 21%.

In the six months to last June, StanChart's Hong Kong unit reported pre-tax earnings of HK$1.33bn (£93.4m), less than a quarter of the group total. As the incorporation takes effect, the effective tax rate on that Hong Kong earnings stream should dip to around 13% from 33%.

StanChart is certainly busy in East Asia and investors can look out for developments on any one of three fronts - China, Hong Kong and South Korea.

The bank has made plain it is looking for a Chinese partner to help it expand. In its own right, StanChart has operated in China since the middle of the 19th century, but a sizeable equity stake in a partner would extend its reach in the world's most populous economy.

The candidate named most often is the Bank of Communications the country's fifth-largest lender, based in Shanghai. The bank, which could be lining up for a listing next year, has more than 2,500 branches in close to 100 cities.

There is also a chance StanChart could seek to take over one of Hong Kong's remaining small- or mid-sized lenders to entrench its position in the very competitive market.

And, last but not least, StanChart remains in the running to take control of KorAm, a Korean lender in which it is already the secondlargest shareholder with a 10% stake. The auction of a controlling 36% slice has dragged on since last year.

There was further recovery for Cathay Pacific despite clear signs that avian flu is still spreading among Asian poultry, especially in China. The shares, battered last week as fears flared over transmission to human beings, rebounded 15 cents or 1.1% to HK$13.90. The Hang Seng index dipped 42.87 points to 13,043.86.

Japan's trade was dominated by a surge in Toyota, which jumped 60 yen or 1.8% to 3460. The carmaker's earnings for the three months to December are due today and could show further strength in the key US market.

As the Bank of Japan stood pat on interest rates as expected, the

Nikkei 225 was little changed, down 17.35 points to 10,464.60.

In Singapore, a 188% jump in third-quarter earnings to S$854m (£275m) at State-linked telecoms group SingTel lifted it two cents, or 1%, to S$2.10. Like Cathay, Singapore Airlines recouped some flu-driven weakness, adding 10 cents to S$11.90, a gain of 0.9%.

The Straits Times index dropped 4.65 points to 1829.99.