The thought of ‘Fa­ther Christ­mas’ pay­out should cheer up in­vestors

China Daily (Hong Kong) - - HK | BUSINESS - PETER LIANG

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.

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