Monday, March 9, 2009

Hang Seng Tumbles 576.94 Points. HSBC Tumble 24%

Whether now was the right time to buy HSBC shares as the share prices already tumble so much. A careful approach and study needs to be implement after their right issue. At HK$33.00, a level that most of us cannot imagine that will happen today. Let us read the latest news about HSBC.

HONG KONG (Dow Jones)--Heavyweight HSBC tumbled 24% Monday as investors sought to cut their holdings in the bank amid an adverse operating outlook and concerns of further price weakness ahead of its rights issue, sending the benchmark index to its lowest level in over four months.

Analysts said the blue-chip index will likely face further downward pressure in coming weeks, tracking similar expected performance on other regional equities markets. They expect the index to soon breach the five-year-low of 10,676 hit on Oct. 27. The Hang Seng Index fell 576.94 points, or 4.8%, to end at its intraday low of 11,344.58, after rising as high as 11,927.89 in the morning trading session.

HSBC accounted for 409.47 points of the index's decline. Turnover for the session totaled HK$35.79 billion, down from HK$46.90 billion Friday. HSBC's 24% decline to HK$33.00 comes just three days before it starts trading ex-rights, meaning that its stock price will be reduced to show the dilutive effect of the bank's rights issue, announced last week. The bank said Monday it plans to issue five shares for every 12 that shareholders own, at 254 pence a share, or around HK$28 a share.

It plans to raise a total of GBP12.5 billion. 'Investors are selling HSBC on concerns over more downside ahead of its ex-rights later this week and weakening earnings outlook in the financial sector is also hampering interest in the banking stocks,' said Jackson Wong, an investment manager at Tanrich Securities. Analysts said investors are also worried the rights issue may not proceed as planned, as interest in the plan will be sharply reduced if shares fall to levels near the rights issue price.

'The issue now is whether the rights issue exercise can be completed, given the recent slide in the share price,' said Y.K. Chan, fund manager at Phillip Asset Management. He said the slight rebound in HSBC's shares Thursday was largely driven by gains in the broader market, and not because of interest for the stock.

'The selling pressure was firm and remains that way for now,' said Chan. Other banks also fell sharply to track HSBC's weak performance. Hang Seng Bank lost 9.0% to HK$67.00, Bank of East Asia declined 7.4% to HK$12.34, and Standard Chartered fell 2.2% to HK$79.65.

Telecom services provider PCCW bucked the trend, ending up 1.1% at HK$3.83 following comments by its chairman Richard Li that he wasn't a subject of investigation by Hong Kong's securities regulator into allegations of vote-rigging over the company's buyout plan.

For the Hang Seng Index, Chan said he won't be surprised if it falls below the recent five-year-low of 10,676 points seen in October, given the weakness in the global banking sector. 'Investors are still holding a wait and see attitude. Long-term investors should sit back and wait for more clear signals before considering to make new investments,' he said. -By Jeffrey Ng, Dow Jones Newswires

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