JPMorgan: Hong Kong/China Banks: Middle East Tension Drives Divergence
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A renewed military confrontation in the Middle East is expected to trigger a risk-off adjustment across bank stocks, according to JPMorgan. Within their coverage, Standard Chartered (STAN) may experience a deeper pullback due to its relatively high Middle East exposure. As of 2025, the UAE accounted for 2.5% of STAN's loans and 5.6% of its revenue. However, underlying credit risk remains manageable, with roughly 73% of its UAE exposure allocated to government and public entities.
HSBC holds a slightly smaller footprint, with Middle East exposure representing 2.3% of its loan book and 3.8% of group revenue. Within this segment, 68% of facilities are corporate loans. Meanwhile, Chinese banks have steadily increased their presence in the Gulf. Lending to the region reached $15.7 billion in 2025, nearly tripling since 2022. Despite this growth, the exposure remains immaterial, constituting merely 0.09% of total loans across the five major state-owned banks.
Given their minimal direct exposure, undemanding valuations, and greater macroeconomic policy flexibility, Chinese state-owned banks should demonstrate stronger resilience than regional peers.
JPMorgan maintains Overweight ratings on HSBC with a target of HKD 165.0 and STAN with a target of HKD 270.0. Chinese banks, including Bank of China and CCB, also retain Overweight ratings.