HSBC gets likely gloomy reporting season started
HSBC Holdings will announce its full-year results today, leading off a peak reporting season that is set to add volatility to the stock market as earnings are expected to have been hit by one of the worst years in modern economic history.
HSBC and Hang Seng Bank will make results announcements today followed by Standard Chartered, Hong Kong Exchanges and Clearing and snack-maker Want Want China Holdings.
After months of speculation, HSBC may finally be close to announcing a rights issue seeking more than GBP12 billion (HK$132 billion) to increase its capital position, according to recent media reports. It may price the two-for-five rights offer at 300 pence (HK$33.02) a share, or about a 40 per cent discount to Friday's closing price in London of 491.25 pence, the Sunday Telegraph reported yesterday.
The lender would disclose GBP7 billion of write-off on goodwill and set aside ?17 billion against growing bad debts, the Sunday Times said.
'If HSBC really undertakes a rights issue, it would offer a short-term positive catalyst for the Hang Seng Index since the biggest overhang [to the market] would be removed,' Winson Fong, a managing director at SG Asset Management (Hong Kong), said last Friday.
The Hang Seng Index last week edged up 112.4 points or 0.89 per cent to 12,811.57, snapping a two-week losing streak. But daily trading turnover was thin and has failed to hit the HK$40 billion mark over the past seven sessions.
Investors could pile back into the market this week, however, once some of the blue chips clear the air by disclosing their much-anticipated results.
'The low level of the Hang Seng Index is a sign that we are expecting bad results, and in a terrible economy and slump, no one can do well anyway,' said Francis Lun Sheung-nim, a general manager at Fulbright Securities. 'So investors can be magnanimous.'
The market is bracing for a stretch of dismal figures after the financial system was rocked last year by a historic shake-up on Wall Street and the most severe global recession since the Depression.
And analysts have warned that the worst was yet to come for banks since lending markets have frozen up and balance sheets have become clogged with bad assets.
'Sentiment is really cautious,' said John Koh, the regional investment director at MEAG Hong Kong. 'Until we are clear what is going to happen in the near term, a lot of people don't want to take any risks because markets are very volatile and equities could [swing] up and down.'
Mr Lun said that if HSBC's results met expectations or were even a touch below them, it may provide a short-term boost to the market.
