Hong Kong's banking sector dragged down by China

The sector now faces lower margins.

According to Macquarie, HK is similar to Singapore in that profitability likely peaked in the first half, with the sector facing lower margins largely dragged down by the China book,  slower loan growth as trade finance and mortgage lending weaken, continued weakness in the fee outlook, and cost pressure.

Here's more from Macquarie:

However, this dour operational outlook should largely be  factored in, and the bottom line may still be salvaged by the likelihood that provisions will  remain low, given few concerns on the asset quality front.

At a time when yields serve as a key attraction, we think its 4.2% dividend yield provides support to the sector. Share prices may not build from the gains already posted, and may merely hover around current levels.