November 30, 2009 / 3:25 AM / in 8 years

HSBC, StanChart rebound; 'Dubai drop' overdone

HONG KONG (Reuters) - Shares of HSBC (0005.HK) (HSBA.L) and Standard Chartered (2888.HK) (STAN.L) rebounded in Hong Kong on Monday as investors viewed Friday’s drubbing on fears of exposure to Dubai as overdone.

HSBC (0005.HK) gained 3.9 percent and Standard Chartered (2888.HK) rose 5.3 percent by 0315 GMT. The benchmark Hang Seng index .HSI was up 3.4 percent.

“The market over-reacted on Friday,” said Phillips Securities analyst Rock Lam. “Over the weekend, UAE has showed support to Dubai’s debt issue so the market is quieting down and shares are rebounding.”

“Although Dubai World is extending its repayment period, it will not pose an impact on banks’ earnings,” he said.

On Friday, shares of the banks fell around 7 percent as investors fretted that exposure to Dubai and its credit problems could further squeeze profits.

Bank of America-Merrill Lynch (BAC.N) upgraded HSBC to “buy” on Monday, in a note titled “Time to go with strength,” brushing off fears of Dubai exposure.

    “With less than 2 percent of loans in UAE, HSBC is well placed to deal with the potential fallout from recent developments in Dubai,” analyst Alistair Scarff wrote.

    HSBC said in August its loan exposure to the United Arab Emirates, which Dubai is a part of, was $15.9 billion, down from $17.5 billion at end-2008.

    Standard Chartered’s loan exposure to the UAE was $7.7 billion, according to the Emirates Banks Association.

    Additional reporting by Clare Jim; Editing by Jacqueline Wong & Ian Geoghegan

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