Posted by: Frederik Balfour on March 10, 2009
It was standing room only on the 40th Floor of HSBC’s splendid Hong Kong headquarters. Clearly the Bank [as it is known here in Hong Kong] had put the PR team on the offensive. Never in my nine years of reporting from this city have I ever gotten a call from them asking if I would attend a press conference. But desperate times call for desperate measures. HSBC’s shares plunged 24% on Monday in Hong Kong, sending shock waves through the investor community. Analysts say the price plunge was caused by institutional investors shorting the stock in advance of the Wednesday cutoff date for a $17.6 billion rights issue. Monday’s closing price was only 12% over the exercise price. At today’s close the bank had a market capitalization of $59 billion.
Clearly, HSBC Asia Pacific CEO Sandy Flockhart had called us together in hopes achieving some damage control to allay investor fears. HSBC Holdings is the bluest of Hong Kong blue chips and has a huge retail investor base. And compared to the troubles at the likes of Citibank, AIG and Royal Bank of Scotland, HSBC is in very good shape to weather the global crisis. At least that’s the way Sandy Flockhart, CEO of HSBC Asia Pacific told it to us, in as many ways as he could. “HSBC has a sustainable banking model….one institution that will get through the storm is HSBC…our underlying business remains profitable….our capital position will give us a solid position, we will come through the storm stronger…the lion is still out there and there is still a big roar in its belly.”
Indeed, as Flockhart took pains to explain, HSBC is one of the few global giants that has survived without any government bailouts. “This bank has loyal shareholders who will support it,” Flockhart said. That includes some of Hong Kong’s most prominent tycoons including Li Ka-shing and Lee Shau Kee. Whether they were also behind the short-selling that occurred on Monday remains a mystery however, even to Flockhart who said “I don’t know and I would love to know” the identity of the culprits. He mentioned more than once that Hong Kong regulators are looking into the possibility of share manipulation by institutional investors. Stay tuned for more on that. But while Flockhart avoided making any comments about the bank’s future performance, the one forward-looking statement he was willing to make was spot on. “We will have volatility up to tomorrow,” he confessed. True enough, by the time the one hour press conference had ended at 4 p.m., HSBC ended the day up nearly 14%.