Hong Kong banking shares advanced across the board, with HSBC Holdings Plc (HKEX: 00005) rising 4.12% to HK$141.2, Standard Chartered Plc (HKEX: 02888) gaining 3.46% to HK$227, Bank of East Asia Ltd (HKEX: 00023) up 3.09% to HK$17.68, and Dah Sing Banking Group Ltd (HKEX: 02356) climbing 2.69% to HK$13.72.
On the news front, the Democratic sweep of the US Congress has reduced market bets on further expansion of US military spending, while boosting expectations among European bank stocks for an improved financing environment and credit outlook. As midterm election results continued to unfold, US Treasury yields declined, and government bond yields in the UK, France, and Italy also fell. The Stoxx Europe 600 Banks Index rose as much as 4.5% at one point, on track for its best single-day performance since May.
On the earnings front, some banks already possess the operational foundation to support a valuation recovery. HSBC Holdings Plc posted a 10% year-on-year increase in pre-tax profit for the third quarter on a constant currency basis and excluding significant items. Banco Santander SA reported a Common Equity Tier 1 (CET1) capital ratio of 12.7% as of the end of September, above the minimum requirement of 9.86%. Earnings growth and capital buffers provide support for banks to absorb potential losses and maintain credit supply.
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