HK tycoons back HSBC cash grab despite stock plunge

HSBC shares plunged yesterday after the banking giant asked shareholders for a US$17.8 billion cash boost, but Hong Kong's powerful tycoons insisted the firm remained a good long-term bet.

The bank's share price slumped 18.8 per cent to 46.25 Hong Kong dollars (US$5.93) in Tuesday trading in Hong Kong, after falling more than 18 per cent in London overnight.

The collapse came after the bank on Monday reported a 70 per cent tumble in annual net profit last year, mainly due to the dire performance of its US unit.

It also asked shareholders to back a huge rights issue, worth US$17.8 billion, in an effort to shore up its balance sheet.

Despite its worse-than-expected results, many of Hong Kong's richest investors believed the rights issue, priced at 28 Hong Kong dollars, was a great bargain.

Allan Zeman, the developer behind Hong Kong's most famous nightlife district, said he interrupted a trip to Thailand to call his investment agent to subscribe to the offer.

"I think it's a once-in-a-lifetime opportunity," said the founder of Lan Kwai Fong Holdings.

Mr Zeman said he had been a customer and investor in the bank for more than three decades and he had full confidence that it would weather the crisis.

"HSBC has not escaped the financial turmoil. But it is less affected than most of the other banks," he said.

David Tung, Hong Kong's oldest stockbroker, said he would subscribe to the offer and would also advise his clients to do the same.

"I have 100 per cent confidence in it. To me, it is the best bank in the world," the 79-year-old told AFP.

Some big-name investors also lined up to take advantage of the rights issue.

However, small investors were disgruntled that their stake in the bank would be diluted after the offering. Some analysts also warned that caution should be exercised.

Ricky Tam, chairman of the Hong Kong Institute of Surveyors, told the Post: "Hong Kong investors have been long-time supporters of HSBC but it's time to make a rational decision."

Shin Wing-ching, head of Centaline Property Agency, one of Hong Kong's largest property agents, said he had sold all his stocks in 2007 and would continue to stay out of the game.

HSBC's chief executive officer Michael Geoghegan said in Hong Kong yesterday that the cash-raising was not needed to fill a short-term hole.

"The capital we are raising today is for our future growth in our business either by organic growth or by acquisitions," he told reporters. "We do not require the capital in 2009 for our internal use."