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Shirley Yam

I put my first HK$50,000 into HSBC Holdings shares and thousands more  afterwards.
I have given my three-year-old one lot of HSBC shares, plus a teddy bear, on each of her birthdays. Like many of my peers, and many of you, I was a die-hard HSBC supporter. 
I had my first outing at the 'Lion Bank'. A photo of me as a girl and Stein the Lion still sits in my drawer. 
When I graduated from  university in the 1980s, a job with the bank was the best, next to one with Citibank. When I got my first salary, it  came through an HSBC account. When I  bought my first apartment, the mortgage was with HSBC. 
It is Hong Kong's crown jewel. Even the bank's decision to move its headquarters from Hong Kong to London left this trust untarnished.
We give the 'Big Elephant' not just our trust but our money. We love its reputation of prudence. We love its stable though unsexy growth and its dividend payout. 
'HSBC can be an expensive buy but never a wrong one' - so goes a local expression.
Yet, it is time to end the unrequited love. Like parting from a long-time boyfriend, it isn't easy. But to save you from regret, it has to be done. 
First, he doesn't love you. HSBC management has shown little care for the interests of its faithful retail investors.
Despite its image as a banner-holder of good corporate governance, the bank issued no profit warning and stonewalled any press questions about the rights issue rumour in the past three months as its share price dived on the uncertainty. Instead, we were reading about the issue in various  British publications. 
HSBC's explanation,  bluntly put by  chief executive Michael Geoghegan:  'There was no need to have a profit warning. The assessment of the financials was clear in the marketplace. All in, the analysts were pretty close to what the results were.'
Since when did HSBC make analysts its official spokespeople? Since when did the bank find it okay to leave its shareholders to feed on leftovers from institutional investors that are privileged with hourly updates by analysts? Since when did the bank decide to leave us to the mercy of insiders?
Second, the guy is not as good as you think. While the management may still pride itself on the fact that it has smaller problems than its rivals, its judgment is now in doubt. 
Back in early 2007, HSBC was among the first to be aware of the subprime mortgage crisis when a sharp rise in defaults at its US consumer finance unit raised the red flag. It did scale back the riskier lending, but it was too little and too late.
In November last year, Standard Chartered and many others went for rights issues and share placements to recapitalise themselves  to survive the long winter and to remain competitive against a growing number  of 'nationalised' rivals.  HSBC chose not to.
Back then, one of its senior executives,  Vincent Cheng Hoi-chuen,  said that the bank was comfortable with its 8.9 per cent tier 1 capital adequacy ratio, and a rights issue would dampen its return on equity and the share price. 
Are these facts and concerns so different now as to justify a rights issue when the share price  has dropped below HK$50 instead of HK$80 two months ago? Better judgment by the management would have saved shareholders from  significant and painful dilution.
Third,  the guy may get even worse. Even after its latest massive write-down, the bank retains assets valued at US$100 billion in its North American 'run-off portfolio'. As the housing market and unemployment get worse, the provision can only grow.
And we haven't mentioned Europe and Asia yet. Bankers worldwide are praying every day that the  over-leveraged 'eastern European bloc' can hold on. If they fail, how well can Asia survive, despite China's determination to spend its way out? 
Don't underestimate the chance of another rights issue unless you  believe Beijing  will bail the bank out at above market price for political  reasons.
Fourth, he is no longer the man you fell in love with. HSBC has changed, and so has the world. The bank  has been dragged down by bad assets and is without government money. Meanwhile, the world  has leapt from 20 years of non-stop growth into recession, and from a free market into state interventionism.  
 HSBC won't continue being the unsexy but stable stock. The rights issue will increase the number of its shares by 40 per cent, making it much easier for hedge funds to borrow and play with its shares. Volatility will be its new character in the short and medium term. 
Having read this far, many of you will say: 'I know, I know. But I got it at HK$90. Should I throw in the towel now, I will lose half of my money. If I join the rights issue and bring down the average cost, I may still be able to recoup it in a few years' time. After all, it's HSBC and it has fallen a lot.' 
Well, I have heard this line before. 
It's 2000.  Richard Li Tzar-kai was proposing a merger with Hong Kong Telecommunications. The share price of Mr Li's empire was going south. The press wrote about a formidably high gearing for the post-merger HKT. But  more than 70 per cent of HKT's shareholders chose to receive shares instead of cash. The rest is history.
I am not saying  HSBC will spiral  downwards like HKT. The moral of the story is never look at what happened but consider carefully what will happen. It is about not letting wishful thinking and emotion rule but facts and realism.
After all, HSBC is not the only stock  in town. Should you believe in an economic rebound, there are stocks better positioned and with less baggage. 
Sell the shares, or at least sell the rights, and put the money into the better alternatives to recoup your loss. Waiting for the sick elephant to fly is not the way to go.



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HSBC

Unrequited love affair with the 'Big Elephant' is over