HSBC Holdings is planning to sell its entire stake in Ping An Insurance as Europe's largest lender by assets tries to take advantage of improving market conditions in Hong Kong, market participants said yesterday.
The London-based lender's 15.6 per cent holding in Ping An was worth about US$9.5 billion before yesterday's market open. Local media have earlier reported HSBC's intention to sell its stake in China's second-largest insurer by premiums.
"HSBC's selling of the H shares of Ping An reflects mounting pressure among European lenders who must hold more core capital as a buffer against insolvency," said a Hong Kong fund manager who declined to be named.
He added that many European banks have a ways to go to achieve the more stringent capital and liquidity requirements under Basel III starting next year.
Meanwhile, an equity trader at a European investment bank said that sentiment in the Hong Kong equity market has improved because there is optimism that the US fiscal cliff problem will be resolved.
The trading environment in Asia has improved but the choppiness is likely to stay for the rest of the year, the trader said.
Shares in Ping An closed down 2 per cent to HK$58.45 after dropping as much as 3.5 per cent. HSBC rose 1 per cent to HK$74.65 each and the Hang Seng Index edged up 0.49 per cent to 21,262.06 points yesterday.
"The positive performance of HSBC's stocks has been an encouraging sign to investors who were sceptical and worried about HSBC's need to raise capital to replenish equity capital," said the fund manager.
HSBC was one of the early investors in Ping An before the insurer went public in 2004 and the bank originally put in a combined US$2 billion in the Shenzhen-headquartered firm, according to HSBC's website.
The british lender boosted its stake in Ping An in 2005 after the first acquisition in 2002.
Spokespersons at HSBC and Ping An declined to comment.
Charoen Pokphand Group, controlled by Thai billionaire Dhanin Chearavanont, is one of the parties interested in buying the Ping An stake from HSBC, the Chinese-language Hong Kong Economic Journal reported on Monday, citing sources.
A person at Charoen said no information could be provided at the moment. Kenneth Yue, an analyst with CCB International said Hong Kong-listed shares of Ping An were trading at about one time its book value, which was fairly inexpensive.
"The insurance sector has been weak due to the persistent weakness in the domestic A-share market and a slowdown in premium income," said Yue.
In a filing last night to the Hong Kong stock exchange, Ping An said it will "pay close attention to the progress" of any move by HSBC regarding its shareholding.