Hong Kong-listed financial stocks slumped yesterday as investors scrambled to reduce exposure to lenders ahead of Bank of East Asia's earnings announcement. BEA fell 4.07 per cent to HK$15.56, extending its three-day decline to 11.39 per cent. HSBC Holdings was also targeted by investors. It slid 3.28 per cent to HK$59, accounting for more than half of the Hang Seng Index's decline yesterday. The index fell 98.79 points or 0.73 per cent to 13,455.88 for its third loss in the past four trading days. Its financial sub-index slid 1.12 per cent. 'The share price of not only BEA but all banks will still be under pressure,' said Linus Yip, a strategist at First Shanghai Securities. 'The overall picture for the banking sector will be difficult in the first half of the year.' Analysts are predicting BEA's announcement today will shed light on an increasingly grim situation for major Hong Kong banks. Last year's net income levels are expected to have all but disappeared after rising credit costs and shrinking loan growth wreaked havoc on balance sheets. And investors are worried that the worst may not yet be over. 'The core operation, at least in the first half this year, is going to be even tougher than in the second half of last year,' said Kim Eng Securities analyst Ivan Li. 'The second half of this year will not be much better, but hopefully the speed of deceleration is going to slow down.' Even a modest recovery in the second half would be welcome news to investors since banks have been under intense pressure over the past year. But with the financial system still strained under the weight of a global economic recession, many are bracing for a prolonged downturn in the industry. 'Confidence will not return in the short term,' Mr Yip said. 'We have to see whether the banking industry or the economy can stabilise and then the market will regain its confidence.' Investors have cut and run from lenders so far this year rather than risk further losses. HSBC and Hang Seng Bank are the second and fifth worst performers in the Hang Seng Index, respectively. Each has fallen by at least twice as much as the index's 6.48 per cent drop. HSBC may face further selling pressure as its earnings announcement date approaches. Mr Yip said the lender could fall to about HK$50 before its report and could slide even further afterwards.