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Naomi Rovnick

HSBC Holdings shares rose for a sixth day yesterday after Goldman Sachs said the worst might be behind the lender, but investors are expected to dump the shares today after receiving their fourth-quarter dividend.
HSBC rose as much as 5.25 per cent to a high of HK$42.10   before closing with a gain of  2.88 per cent at HK$41.15. In London, the stock finished  4.07 per cent ahead at ?4.60  (HK$50.10) while its American depositary receipts in New York were up 3.53 per cent at US$27.86 at noon.
The Hang Seng Index fell  0.76 per cent to close at 12,878.09 points.
The bank is  trying to raise US$17.7 billion through a rights issue that has battered its share price in recent weeks. The shares fell to a 23-year low of HK$33 on March 9  amid concerns the bank was facing tough times.
In a more positive sign for the London-based lender, Goldman  yesterday upgraded its rating on HSBC to 'neutral' from 'sell', citing better business prospects.
Goldman is the underwriter of HSBC's  rights issue.
The bank's  decision to cut its losses on its United States unit Household Finance Corp, write off goodwill and raise capital 'were fundamentally welcome moves that begin to refocus the group back on its core businesses', Goldman said.
'It makes the shares more investable again as the path to eventual recovery gets clearer.' 
Goldman is the second leading  bank in a week to give a rosier view of HSBC after Japan's Daiwa Institute of Research upgraded its  rating to 'hold' from 'underperform'.
Vincent Cheng Hoi-chuen, the chairman of Hongkong and Shanghai Banking Corp, the Asia-Pacific unit of HSBC, welcomed Goldman's decision to upgrade the stock but declined to make further comment.
Despite the improving prospects, HSBC shares are set to continue their rocky performance.
Shareholders who buy the shares today  will not be entitled to receive a final dividend of 78 HK cents per share for last year.  
Today, the stock exchange will set an adjusted ex-dividend price for HSBC after deducting the value of the dividend.
'Some HSBC shareholders may dump their shares on the ex-dividend day in order to spare money for the upcoming rights issue,' said Ricky Tam Siu-hing, the chairman of the Hong Kong Institute of Investors.
HSBC will  meet shareholders tomorrow  to seek  support for the  issue. The rights shares will start trading on Monday if shareholders support the offer of  five new shares for every 12 ordinary shares at HK$28 each.
'I expect HSBC will experience higher trading volatility for both volume and price next week after formal trading of the rights,' said Winson Fong, the managing director of SG Asset Management (Hong Kong).
'HSBC has found a temporary floor at the current level as it is too risky for short selling, given the recent strength of  global financial stocks in  a better operating environment.'
Ping An Insurance (Group), of which HSBC holds 16.8 per cent, said it would join the rights issue.
Mr Cheng said he appreciated the insurer's long-term support. He said institutional investors and some individual investors had also responded positively to the rights issue, adding that the offer of HK$28 was a good price for investors.
 Chairman Stephen Green has become increasingly bullish  about  the bank's prospects  after  the fund-raising, telling  the French newspaper Le Figaro yesterday that HSBC was likely to use the US$17.7 billion it would raise for organic growth and future acquisitions. 
Mr Green  said HSBC would use the cash to buy competitors' assets in Asia and the Middle East by 2012.
'We are aiming for both organic growth and growth through acquisitions,' he said.



HSBC extends rally on  Goldman Sachs upgrade