A surge in HSBC and Ping An Insurance shares pushed Hong Kong's key stock market barometer to a 16-month high yesterday after the London-based lender said it would sell its stake in the Chinese insurer to Thailand's Charoen Pokphand Group.
The premium of 2.3 per cent to Tuesday's closing price of the Shenzhen-based insurer reflected a strategic merger and acquisition opportunity for the Thai conglomerate, according to people familiar with the deal.
The sale of HSBC's stake in Ping An also helped remove a prolonged overhang on Ping An's share price as investors were worried about financial and operational uncertainties in China's second-largest insurer by assets, they said.
HSBC said yesterday that it would sell its 15.6 per cent stake in Ping An to companies controlled by Charoen Pokphand for US$9.4 billion, giving it a net gain of US$2.6 billion.
Shares of HSBC, Europe's biggest lender by market value, rose 1.7 per cent to finish at a 52-week high of HK$80, helping the Hang Seng Index to close at 22,270.91 points, up 2.16 per cent from Tuesday.
Ping An's shares advanced 4.9 per cent to HK$60.50, extending their gain to 18 per cent this year, while HSBC's stock has gone up by more than 36 per cent for the year.
Karen Chan, an insurance analyst at Bank of America-Merrill Lynch (BAML), said the change in ownership at Ping An would not affect the company's day-to-day operations.
But she added that the removal of a near-term overhang might be offset by longer-term sentiment over the loss of HSBC as a strategic partner and corporate governance supporter.
After the Ping An sale, HSBC said its core tier-1 capital ratio and the total capital ratio would rise by 50 basis points and 100 basis points to 12.2 per cent and 16.6 per cent, respectively.
But under BAML's assumption, the sale of the Ping An stake could bring HSBC's core tier-1 ratio to 10.5 per cent by the end of next year from 9.6 per cent in the third quarter of this year.
Chan estimated that HSBC's profit before tax next year would be US$1 billion lower than it otherwise would have been.
"HSBC's latest effort to raise additional cash to replenish its capital base has been welcomed by investors" as exiting non-core operations globally would help the bank redeploy capital in faster-growing markets, a fund manager in Hong Kong said.
The British bank offloaded some of its general-insurance business in Hong Kong, Singapore and Mexico for about US$914 million in March, after group chief executive Stuart Gulliver announced the group would quit non-strategic and non-core investments.
The company made 21 disposals and business closures this year, which realised total annualised savings of US$3.1 billion, HSBC said.