HK Stock Market Move | BOC Hong Kong (02388) rises more than 5%, strong expectations of interest rate hikes are likely to increase the company's net interest margin. The decrease in industry credit costs will provide support for profits.

BOC HONG KONG (02388) rose more than 5%, up 4.74% as of the time of writing, at 50.65 Hong Kong dollars, with a trading volume of 1.42 billion Hong Kong dollars. JP Morgan released a research report stating that with the release of a more hawkish signal from the Federal Reserve rate meeting, the SOFR and HIBOR forward yield curves are expected to rise in the next 12 to 18 months. It is expected that BOC HONG KONG will maintain a net interest margin of about 1.6% in the fiscal years 2026 and 2027, driving high single-digit growth in net interest income in fiscal 2026. In addition, the risks associated with Hong Kong Commercial Real Estate (CRE) have diminished, with industry data and communication with management showing no significant increase in non-performing loans in the Hong Kong CRE portfolio in the first half of fiscal 2026. Credit costs are expected to decrease annually, providing support for profitability in fiscal 2026 to 2028. JP Morgan further stated that the market has already factored in expectations of increasing TSR through share buybacks or special dividends. Analysis shows that the company is capable of providing shareholders with returns of up to 3% annually in fiscal years 2026 to 2028, while maintaining a CET1 ratio above the industry average. Under the baseline scenario, it is estimated that a special dividend of 0.95 Hong Kong dollars per year could contribute 2 percentage points to TSR. The bank raised BOC HONG KONG's profit forecast for fiscal years 2026 and 2027 by 8% and 9%, expecting that with reasonable valuation and excellent total shareholder return (TSR) support, the stock price will continue to outperform the market in the next 6 to 12 months.