Today I am looking at why I consider Standard Chartered (LSE: STAN) to be a terrific growth selection.
China pushes the stimulus button
Signs of financial cooling in key Asian markets has tempered the performance of stocks such as Standard Chartered, which generate 
the lion’s share of their earnings from these emerging regions. And news that regional heavyweight China saw growth slow to 7.4% during the first quarter — the lowest rate of expansion for 18 months — hardly calmed these tensions.
Still, I believe that Beijing’s promise to inject further stimulus into the economy should help protect the likes of Standard Chartered from further earnings weakness. The effect of souring investor sentiment over the past year has adversely affected the scale of activity at its previously-titled Wholesale Banking division, so the implementation of fresh easing in China should help resuscitate near-term enthusiasm for the region.
Lawmakers have introduced a series of measures to stimulate the economy over the past couple of months, including the fast-tracking of massive infrastructure projects such as housing and railroads, while the People’s Bank of China has also cut reserve ratio requirements for a number of banks and eased lending rules for farms and small businesses.
China’s current actions lack the scale of those seen in previous years, but Beijing will not shy away from keeping the tap turned on should the economy continue to slow.
Standard Chartered derives around 65% of operating profit from its operations across Asia Pacific, and boasts significant exposure to India, Singapore and Korea. This region is of course hugely dependent on a strong China, and consequently on Standard Chartered, particularly as the bank sources some 27% of profits from Hong Kong alone. So news of fresh stimulus in China bodes well for revenue growth.
Standard Chartered is expected to punch earnings growth of 26% and 9% respectively, leaving the company dealing on miserly P/E ratings of 10.5 and 9.6 for these years. Enduring problems in Korea, and the effect of emerging market currency weakness, are of course an ongoing concern.
But I suggest that these issues are currently factored into the share price, and believe that the effect of rising disposable income levels and leaping population rates in developing regions should underpin a resurgence confidence in these areas over the long-term. As a consequence I believe that Standard Chartered is a fantastic bet for tremendous earnings growth.
