By Jon Menon and Ben Livesey

May 25 (Bloomberg) -- HSBC Holdings Plc, Europe's biggest bank by market value, gained $600 million on its stakes in China and will invest mostly in emerging-market this year.

HSBC booked one-time profits on its holdings in Ping An Insurance (Group) Co., China's second-biggest insurer; and Industrial Bank Co. following their initial public stock offerings, the London-based bank said at its shareholder meeting today. ``Strong performance'' in Hong Kong and Asia overall led HSBC to a ``good start'' this year, it said.

HSBC is concentrating on Asia and emerging markets as rising consumer defaults saddle its North American operations, which made ``subprime'' loans to people denied credit by other banks. The biggest lender in Hong Kong, HSBC has spent $2 billion grow its own Asian operations and invested $3.4 billion in other banks and insurers in the region, it told investors today.

``Management is shifting the focus away from subprime to profitable opportunities in emerging markets, where they will be allocating resources,'' said Sandy Chen, an analyst at Panmure Gordon & Co. in London with a ``hold'' rating on the stock. ``The question is, when will HSBC return to favor in the market?''

HSBC shares rose 0.1 percent to 931 pence in London today. They are almost unchanged in the past 12 months, giving the bank a market value of 108 billion pounds ($214 billion). The FTSE 350 Banks Index has gained 10 percent in the period.

Chief Executive Officer Michael Geoghegan declined to discuss HSBC's interest in ABN Amro Holding NV, the No. 1 Dutch bank and the target of a bidding war between U.K. rival Barclays Plc and a group led by Royal Bank of Scotland Group Plc.

`Slide Rule'

``We run our slide rule over everything,'' Geoghegan said to reporters at the meeting. ``People have made offers. I watch with interest,'' he said.

The bank's profit in the last half of 2006 fell 5.7 percent to $7.06 billion as bad loans eroded profit, the company said in March. Two thirds of HSBC's $10.6 billion in loan defaults last year were in North America, where the bank bought Household International Inc., now called HSBC Finance Corp., in 2003 for $15.5 billion.

North American performance this year is in line with forecasts, Geoghegan said. The bank put a new U.S. management team in place and reinforced credit controls, he said.

``We have stopped production on nonprime correspondent mortgage loans and eliminated certain classes of products,'' he said. ``We have recognized the problem ahead of the industry, and we have taken swift and decisive steps to fix it,'' he said.

HSBC is focusing on Latin America and Asia to offset profit weakness in the U.S. The bank is growing consumer operations in Hong Kong and China, HSBC Chairman Stephen Green said at the meeting.

`Fast Growing Areas'

``Earlier this year, we incorporated our operations in China, paving the way for us to extend our services to mainland Chinese citizens,'' Green said at today's meeting. ``Going forward, we will prioritize investments in these fast growing areas.''

The bank entered five countries in Latin America with the $1.77 billion purchase of Grupo Banistmo SA, Panama's largest bank, in November. It was Green's biggest acquisition since taking over from John Bond a year ago. The bank now 4,000 branches in Latin America, up from two 10 years ago.

``Last year, Latin America contributed pretax profits of $1.7 billion, with Mexico providing over $1 billion for the first time,'' Geoghegan said today. Revenue in the region is growing it line with expenses, he said.

`Emerging-Markets Led'

HSBC's corporate, investment banking and markets division is ``emerging-markets led,'' with more than half of first-quarter profit coming from Asia and Latin America, the bank said. Foreign exchange and securities services had ``strong performances.''

``We are focusing this very much on the emerging markets, not just Asia but Latin America as well,'' Geoghegan said commenting on HSBC's global investment banking strategy. The bank is focusing its New York-based operation on servicing companies trading in emerging markets. ``It makes much more sense,'' he said.

In the U.K., bad loans were ``broadly in line'' with the previous quarter, and European revenue growth is ``constrained'' by competition and credit concerns, HSBC said.

In Europe ``the quality of corporate lending is not at the same high standards as before,'' Geoghegan said. HSBC, which received a Russian banking license this year, will open a retail branch in Moscow and perhaps St Petersburg, the bank said.

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