00023 Overview

Changes to Southbound Stock Connect: The Shenzhen Stock Exchange has updated the list of securities eligible for Southbound Stock Connect, effective today, adding several new stocks including BANK OF E ASIA and GOFINTECH QUANT.

New Additions: Other notable additions to the list include WUXI LEAD, CTF SERVICES, and DEEPEXI TECH, among others, with varying short selling ratios and price changes.

Removals from the List: Several stocks have been removed from the Southbound Stock Connect list, including SHUI ON LAND and PAX GLOBAL, which also show significant short selling activity.

Market Impact: The adjustments reflect ongoing market dynamics, with some stocks experiencing notable price fluctuations and short selling ratios, indicating investor sentiment and trading strategies.

Moody's Outlook Upgrade: Moody's has upgraded the outlook for BANK OF E ASIA from "Negative" to "Stable" due to the bank's significant reduction in exposure to stressed commercial real estate in mainland China and Hong Kong.

Improved Loan Metrics: The bank's Hong Kong commercial real estate risk decreased from 14.5% of total loans at the end of 2022 to 9.9% by the end of 2025, with a majority of these loans being secured and having a low loan-to-value ratio.

Positive Outlook for Hong Kong Financial Stocks: Jefferies is optimistic about Hong Kong financial stocks in 2023, driven by an active IPO market, cross-border capital flows, and a recovering residential property market, with expectations of HIBOR normalization by 1H26.

Stock Recommendations: Jefferies upgraded HKEX to Buy, raising its target price from HKD373.94 to HKD502, citing its higher leverage effect and attractive valuations.

Local Banks Performance: While local bank stocks are expected to yield positive returns, they may lag behind international counterparts due to lower capital returns, with BOC Hong Kong rated Hold and its target price increased from HKD31 to HKD48.

Bank of East Asia Insights: Jefferies anticipates high credit costs for Bank of East Asia but sees trading opportunities linked to potential index inclusion and property market recovery, raising its target price from HKD12 to HKD16.

Positive Outlook for Hong Kong Financial Stocks: Jefferies predicts a favorable year for Hong Kong financial stocks, driven by an active IPO market, cross-border capital flows, and a recovering residential property market, with expectations of HIBOR normalization by 1H26.

Stock Recommendations: Jefferies upgraded HKEX to Buy, raising its target price from HKD373.94 to HKD502, citing its higher leverage effect and attractive valuations.

Local Banks Performance: While local bank stocks are expected to yield positive returns, they may lag behind international counterparts due to lower capital returns, with BOC Hong Kong and Bank of East Asia rated Hold.

Target Price Adjustments: Jefferies increased the target price for BOC Hong Kong from HKD31 to HKD48 and for Bank of East Asia from HKD12 to HKD16, highlighting potential trading opportunities amid high credit costs and market recovery.

Strategic Guidance: BANK OF E ASIA aims to increase its ROE target to 7% by 2028, up from 3.1% in 2025, with market expectations at 5.1%, according to a Citi report.

Dividend Projections: The bank's dividend target for 2028 is set to double from the 2025 level, projecting a DPS of approximately HKD1.2.

Citi's Forecast: Citi forecasts that ROE will reach 6% by 2028, which is below the bank's target but above the general market forecast of 5.1%.

Stock Upgrade: Following its inclusion in the Hang Seng Composite Index, Citi upgraded BANK OF E ASIA from Neutral to Buy, raising the target price from HKD14.9 to HKD16.

Bank of East Asia's Profit Decline: The Bank of East Asia reported a 57% year-over-year drop in net profit for 2H25, totaling HKD947 million, which was 34% below Goldman Sachs' forecast.

Impairments and Losses: The significant profit decline was attributed to a HKD625 million impairment on investment properties and a one-time loss from its associate, Guotong Trust, in China.

Goldman Sachs' Rating and Target Price: Goldman Sachs maintained a Sell rating on the Bank of East Asia while raising its target price from HKD13.5 to HKD14.

Market Activity: The bank's stock experienced a short selling of $13.29 million, with a short selling ratio of 11.105%.