Shares of HSBC and Ping An Insurance are expected to rise today on the back of bullish equity market sentiment, and news that mainland regulators have approved HSBC's US$7.4 billion sale of its Ping An stake to Thailand's Charoen Pokphand.
"This is positive news to HSBC because the sale proceeds will help boost its capital ratios," said Christfund Securities research director Simon Lam Ka-hang. "But it won't be majorly positive news, since the mainland market's bull run is expected to have more upside, so one could argue that selling the stake later may be even better.
"As for Ping An, the news is also good for its share price, since it removes uncertainties of when its shares may be sold in the market and by what distribution method."
Lam said the two financial giants would also be boosted by the US share market's 1.08 per cent gain last Friday to surpass the 14,000-point level for the first time since October 2007, adding the Hang Seng Index might rise above 24,000 points today.
HSBC said its core tier-1 capital ratio would rise 50 basis points to 12.2 per cent, and its total capital ratio would rise 100 basis points to 16.6 per cent, after the Ping An sale.
Thai billionaire Dhanin Chearavanont's Charoen and HSBC last Friday said payment was made in cash after the China Insurance Regulatory Commission approved the sale of 976.1 million H shares in the nation's second-largest insurer, ending six weeks of speculation over the deal's fate. HSBC expects to complete the sale on Wednesday.
The deal will generate a profit of US$2.6 billion for HSBC, bolstering chief executive Stuart Gulliver's efforts to lift profits, hurt by US probes of money laundering and compensation claims from clients in Britain.
Charoen said last month it had the resources to complete the purchase, dampening concern the deal would collapse after Caixin Online reported that China Development Bank withdrew financing.
HSBC agreed in December to sell its 15.6 per cent holding in Ping An to Charoen in two phases for about US$9.4 billion. The first stage, comprising shares valued at about HK$15 billion, was completed on December 7.