The thought of ‘Father Christmas’ payout should cheer up investors
In a c o l u m n p u b l i s h e d recently in the business section of a mass circulation, Chineselanguage newspaper, a commentator reminded readers of a long-forgotten stock market adage that’s unique to Hong Kong — “When the Christmas bell chimes, buy Hui Fung.”
“Hui Fung” is, of course, the commonly known Chinese name for HSBC — Hong Kong’s largest bank.
The rationale is that HSBC is known to have the tradition of delighting its shareholders with a fat final dividend payout to usher in each New Year. That “bonus” used to refer to the many institutions and pensioners who had bought shares more for long-term dividend income than for short-term capital appreciation.
Since the great global recession that has kept interest rates at abnormally low levels in recent years, HSBC, like most banks, had fallen out of favor in all major markets. The higher rate of dividend return from banks was far from enough to make up for the capital loss as their share prices continued to tank.
Not anymore. A much expected US interest-rate hike next month is widely seen to signal the rise in borrowing costs not only in the United States, but also in Hong Kong. The benchmark one-month interbank borrowing rate (hibor) has already surged to an average of more than 0.4 percent in the past week — a six-month high.
HSBC, together with its subsidiary, Hang Seng Bank, stands to benefit the most from the rate hike as a key lender in the local interbank market by nature of its stranglehold on a huge share of total customer deposits. HSBC, as well as Hang Seng, are also seen to have taken an uncharacteristically aggressive stance in competing for mortgage-lending and personal-loan businesses.
Unsurprisingly, HSBC shares have returned to the market limelight, having risen from about HK$40 to above HK$60 apiece in the past few months. The bank’s share buyback program has helped lift prices, but stock analysts have largely taken a much more bullish view of the bank’s earnings prospects than before.
HSBC’s dividend payout in the first three quarters of this year had been left unchanged from a year earlier. Analysts expect the bank to be more generous in its final payout to match, or even exceed, the dividend return rates of past years in the wake of its stock price surge in recent months.
Investors are not going to get that “bonus” before Christmas. But, just the thought that it’s forthcoming may be tempting enough to give the bank serious consideration.