Hong Kong watchdog probes HSBC stock plunge

Hong Kong's securities watchdog said yesterday it was investigating a last-minute stock exchange sell order that pushed shares in banking giant HSBC to their lowest level in almost 14 years.

One single transaction in the final moments on Monday of the so-called closing auction that winds up every trading day in the Chinese territory almost doubled the day's losses for shares of HSBC, which ended down 24.1 per cent.

The drop saw more than €12.5 billion wiped off the bank's market capitalisation. One of Hong Kong's leading stock commentators broke down in tears live on TV as the share price collapsed. The Securities and Futures Commission (SFC) said it was looking into the transaction, which reportedly saw 4.7 million shares dumped shortly before the close.

It is believed the shares were sold off by short-sellers hoping to buy them back at a lower price once the bank completes its planned rights issue of new shares, which HSBC is undertaking to raise capital.

Hong Kong Financial Secretary John Tsang said he had met the SFC on Monday evening.

"Lots of Hong Kong people hold HSBC shares and they are very concerned about the ups and downs of its price," Mr Tsang said.

Last week, the bank announced a worse-than-expected 70 per cent drop in annual net profit and said the rights issue was needed for future investments - not to shore up its balance sheet.

It said the poor results were mainly due to the dire performance of its US unit, where it has written off a huge chunk of its debt.

The bank has received pledges of support from major institutional investors and tycoons in Hong Kong. Goldman Sachs Group, JPMorgan, Credit Suisse and Royal Bank of Scotland Group are among the underwriters of the deal, according to Dow Jones Newswires.

Ratings agency Moody's on Monday downgraded the outlook on HSBC's debt to "negative" from "stable."