HSBC’s stock surged more than 10 per cent on Monday after its largest shareholder, China’s Ping An Asset Management, increased its stake, marking a vote of confidence in the global lender despite rising tensions between Washington and Beijing.
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.
HSBC’s Hong Kong-listed shares advanced to as high as HK$31.30 when trade opened on Monday following the transaction, in which Ping An bought 10.8m shares at an average of HK$28.29 each. Shares closed up 9.2 per cent in Hong Kong, their best one-day rise in more than 11 years. The bank’s London-listed shares opened up 10.5 per cent.
Monday’s tentative recovery is a welcome respite for HSBC’s share price, which has more than halved this year — including a 9 per cent drop last week alone — to a 25-year low as the lender has become increasingly entangled in geopolitical tensions between the US, UK and China.
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 due to the coronavirus crisis.
An HSBC insider suggested that Ping An’s share purchase was most likely 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,” 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. A spokesman for Ping An said: “This is a long-term financial investment.”
Last week’s decline in HSBC’s share price came after Chinese state-run newspaper the Global Times again 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.
HSBC 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.
On Monday, the Global Times 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 it announced this year it would suspend its dividend payment.
Ping An’s move sparked speculation that China was easing its view of HSBC. The Global Times said the increased stake could help HSBC improve its relationship with Beijing.
However, Hugh Young, head of Asia at investor Standard Life Aberdeen, said the increased position was not necessarily 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?” Mr Young 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.’”
Michael Chang, an analyst at brokerage CGS-CIMB, said he did not think Ping An had special insight into HSBC’s fate because it was not a state-owned enterprise. He characterised the investment as a sign the Chinese conglomerate believed HSBC would resume paying dividends.
“You can also see it as another indicator that Ping An believes that if the share price of HSBC continues to fall it could consider topping up even more,” Mr Chang said.
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.