JP Morgan: The taxation of overseas policy income in mainland China has limited impact on the fundamentals of HSBC HOLDINGS (00005) and STANCHART (02888).

JPMorgan released a report stating that Caixin reported cases where mainland residents are being taxed on the returns from offshore insurance policies. Although the report indicates that law enforcement has not yet been uniform nationwide and that local tax authorities are enforcing this inconsistently, the related headlines have raised market concerns about potential negative impacts on bank insurance income. The bank estimates that insurance income from mainland visitors (MCV) will account for about 1% of HSBC HOLDINGS' (00005) income and approximately 0.7% of STANCHART's (02888) income in the first half of 2026. Even with an expanded scope of enforcement, it still believes that Hong Kongs insurance products remain competitive compared to mainland alternatives. Therefore, the expected impact on the fundamentals and profitability of HSBC and Standard Chartered is limited, though the news may dampen short-term sentiment and stock prices. The bank pointed out that any resulting weakness could provide a buying opportunity, reiterating its overweight ratings on HSBC and Standard Chartered, with target prices set at HKD 200 and HKD 310, respectively. JPMorgan prefers Standard Chartered due to its strong earnings per share growth, clearer trajectory of return on equity expansion, and reasonable valuations.