Banking & Finance

HSBC shares rally to a six-month high after executing HK$105m share buyback in London

The buyback marks the debut of a US$2.5 billion share repurchase plan

PUBLISHED : Friday, 05 August, 2016, 1:11pm
UPDATED : Friday, 05 August, 2016, 1:20pm

Shares of HSBC Holdings rose to a six-month high at Friday’s midday trading pause in Hong Kong, bolstered by an announcement that plans to buy back its shares got underway Thursday in London.

HSBC rose 1.5 per cent to close the morning session at HK$53.8, its highest level since February 2.

The share ranked as the most heavily traded in Hong Kong, with volume of 897.40 million.

The bank, the largest lender in Hong Kong and Europe, said in a stock exchange filing on Friday morning that it has started its share repurchase programme on Thursday with an initial outlay of £10.27 million (HK$105.47 million).

HSBC, which is dual listed in Hong Kong and London, said the purchase was made on the London Stock Exchange from Goldman Sachs International, comprising 1.997 million shares at an average price at £5.14.

Following the purchase, HSBC will have 19.92 billion ordinary shares in issue, the bank said in the announcement.

HSBC unveiled a US$2.5 billion share buyback during its interim profit result announcement on Wednesday. The bank reported a 29 per cent fall in pre-tax profits for the six months to the end of June to US$9.7 billion, down by US$3.9 billion compared with last year.

HSBC buyback sparks rise in share price, despite 29pc slump in interim profit

Friday’s gains in Hong Kong reflect the biggest two-day advance in six weeks.

Stuart Gulliver, the bank’s chief executive, said the buyback was made possible thanks to capital from the sale of its Brazilian business. The buyback is expected to be completed by the end of the year.

Louis Tse Ming-kwong, a director of VC Brokerage, said the share buyback would boost the share price of HSBC.

“The share buyback plan, which will last until the end of the year is positive news for the share price. HSBC has been performing poorly in the first half and there are many short position. The share buyback would make both fund managers and retail investors happy,” he said.

Ahead of the buyback plan announcement on Wednesday, HSBC shares had slumped 17.93 per cent since January. As of the midday closing price on Friday, the share was down 10.9 per cent year to date, compared with a 1 per cent gain in the Hang Sang Index.