HSBC shares surged more than 10 per cent on Monday after its largest shareholder, China’s Ping An Asset Management, increased its stake, delivering a vote of confidence in the global lender despite rising tensions between Washington and Beijing.
The increase is a welcome respite for HSBC’s share price, which has more than halved this year — including a 9 per cent drop last week — to a 25-year low as the lender has become increasingly entangled in ill-feeling between China, the UK and US.
Investors have also been concerned by the prospect of lost revenues as interest rates are slashed to record lows around the world and after British regulators forced it to cancel its dividend for the first time in 74 years because of the coronavirus crisis.
Ping An revealed in a stock exchange filing late on Friday that it had raised its holding in HSBC to 8 per cent, up from 7.95 per cent, buying 10.8m shares at an average of HK$28.29 each.
When trading began in Hong Kong on Monday, HSBC shares rose to as high as HK$31.30 before closing up 9 per cent, their best one-day increase in more than 11 years. The bank’s London-listed shares also closed up almost 9 per cent.
An HSBC insider suggested that Ping An’s share purchase was likely to be linked to financial rather than political considerations.
“Ping An needs cash flow to meet its customer commitments. If you believe the HSBC dividend will be resumed next year then the shares look attractive at these levels,” said a person familiar with the bank’s thinking said.
“If the dividend is restored to the pre-Covid 51 cents per share that’s a 12 per cent yield.”
HSBC declined to comment. Ping An said: “This is a long-term financial investment.”
The decline in HSBC shares last week came after Chinese state-run newspaper the Global Times reported that the lender was a candidate for inclusion in Beijing’s “unreliable entities” list of companies that had allegedly harmed China’s interests. Such a move would threaten the bank’s profitable Hong Kong and mainland businesses.
The bank has become a target of state media attacks because of its role providing evidence for the US government’s case against Meng Wanzhou, Huawei’s chief financial officer. Washington is trying to extradite her from Canada over alleged sanctions violations. Ms Meng has denied the allegations.
The Global Times on Monday suggested the bank “get rid of senior executives who trapped Huawei and those remaining who are unfriendly toward the Chinese mainland”.
HSBC has also faced protests from shareholders in Hong Kong after saying that it would suspend its dividend payment.
The Global Times said Ping An’s increased stake could help HSBC improve its relationship with Beijing.
However, Hugh Young, head of Asia at investor Standard Life Aberdeen, said Ping An’s purchase should not be viewed as a sign that China had “forgiven and forgotten” its grievances with the bank, and the threat of being placed on the unreliable entities list had not disappeared.
“Does the Chinese state always act in complete unison?” he said. “Not necessarily, so it might just be Ping An saying: ‘Well, it’s flat on its back [so] we might have a bit more.’”
Kingston Securities’ Dickie Wong said he was bearish on HSBC’s outlook because of the geopolitical tensions affecting the company and its dividend suspension.
“After the recent slump of its shares and also the news of Ping An Asset Management, it’s just simply bounced back a little bit, but nothing more than a technical rebound,” he added.
Shares in Ping An, which became HSBC’s largest shareholder in 2018, closed 0.3 per cent lower on Monday.
Get alerts on HSBC Holdings PLC when a new story is published