<P><FONT size=5>高盛-亚太期权研究-卖出汇丰期权10.03</FONT></P>
<P><FONT size=5>October 3, 2007<BR>Pan Asia: Options Research<BR>TRADE IDEA<BR>HSBC - sell covered strangles</FONT><BR></P>
<P> <FONT size=6>HSBC – sell options to enhance returns as stock ‘inches’ higher</FONT></P>
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<P>Enhance returns on a core holding<BR>Our analyst raised his HSBC 12-month price target to HK$161 from HK$158<BR>(based on 1.81x 08E BVPS), expecting shares to “inch up” over the next six<BR>months (risks to target price: aggressive US rate cuts, sharply rising<BR>NPLs/losses on subprime mortgages). He sees value with HSBC (sum-ofparts<BR>of HK$162 and HK$148 assigning zero value to Household), yet<BR>expects shares to grind, not jump, higher. Despite a potential tailwind from<BR>further US Fed rate cuts giving him a positive bias, the long-tailed<BR>Household (HI) overhang, a slowing US and Europe, and the “why bother,<BR>too many moving parts” factor should slow upside momentum.<BR>Options expensive, in our view<BR>HSBC 6-month ATM implied volatility (19.5%) is at its 3-year high and well<BR>above 1-, 3-, 6-, and 12-month realized volatility, which contrasts with the<BR>average HK stock where 6-month implied vol is currently below realized.<BR>Implied vol is also at a premium to its London listing (HSBA.L) for the first<BR>time in three years, despite lower realized volatility.</P>