Hong Kong-listed bank stocks outperformed the Hang Seng Index by 18% in October, largely driven by news of HANG SENG BANK's (00011) potential privatization. However, the overall banking sector fundamentals remained stable, with moderate loan growth and a narrowing rise in Hong Kong interbank rates.

JPMorgan noted that while downside risks for HSBC HOLDINGS (00005) are largely priced in, and privatization deals could boost earnings per share and return on equity from 2027, the firm still prefers regional banks over local ones. This preference is based on regional banks' stronger pre-provision operating profits and lower exposure to Hong Kong/Mainland China property risks.