While S&P 500 financial-sector components Bank of America (BAC) and Citigroup (C) are showing some solid year-to-date gains (despite Citigroup’s recent pullback to its 50-day average), some foreign banks are showing even better performance.
India-based HDFC (HDB) has been rallying to new highs with very little media fanfare. It’s not exactly a stealth stock, however, being a component of popular emerging-market ETFs such as the iShares MSCI Emerging Markets Fund (EEM) and the Vanguard MSCI Emerging Market Fund (VWO).
The latter, of course, is in the process of dropping the MSCI index in favor of the FTSE Emerging Index.
Despite having a market cap of around $32 billion, HDB’s NYSE-listed ADRs move only 527,000 shares per day, on average. That’s not bad liquidity, but falls short of the trading volume seen in Banco Bradesco (BBD) or fellow Indian financial Icici Bank (IBN).
The earnings potential and the overall growth story make this one to watch. The stock has a high beta, 1.31, meaning that there is some extra downside risk – as well as upside risk, of course.
At this juncture, it’s a bit too extended beyond its short- and medium-term moving averages, as well as its 200-day. It needs a pullback – even to a short-term line, such as the 5-day or 15-day – to offer a new entry opportunity.
Icici Bank is also worth a look, though its technical performance is currently weaker. However, that pullback could offer a buy opportunity before HDFC does. The stock is hovering below its 50-day line and above its 200-day. Watch for it to continuing getting support above that longer-term price line.
The earnings outlook on Icici is also less robust than on HDFC. Wall Street has pegged 2013 earnings at $1.98 per share, a year-over-year decline of 26%, although analysts see growth returning in 2014, with profit of $3.22 expected.
