People wearing protective masks walk past a HSBC Holdings Plc logo at the bank's headquarters building in Hong Kong, China, on Thursday, Oct 22, 2020. (CHAN LONG HEI / BLOOMBERG)
HSBC Holdings Plc shares surged as much as 8 percent in Hong Kong trading on optimism Europe’s biggest lender may soon resume paying dividends as a turnaround gathers speed.
The shares rose 6.5 percent to HK$42.35 in the Hong Kong Special Administrative Region (HKSAR), making it the best performer in the benchmark Hang Seng Index. They have still declined 30 percent so far this year.
The shares rose 6.8 percent to HK$42.45 as of 11:54 am in the HKSAR, paring this year’s decline to 30 percent. They gained 4.1 percent in London on Tuesday
“This is mainly due to the change in market expectation, as HSBC’s operating conditions aren’t as bad as expected previously,” said Richard Cao, analyst at Guotai Junan International. “It’s valuation is also attractive so a catch-up rally is possible.”
Goldman Sachs Group Inc on Tuesday advised investors to buy the London-based lender, which beat analyst expectations in the third quarter and signaled it may resume limited dividend payments for this year. British regulators have signaled a willingness to soften their stance on payouts, people familiar have said.
The shares are up about 50 percent from a 25-year low at the end of September.
Continued outperformance would depend on earnings upgrades driven by an improving economic environment, better cost management as well as asset disposals, Goldman analysts led by HKSAR-based Gurpreet Singh Sahi wrote in a Nov 24 report.
JPMorgan Chase & Co said in a note on Monday that Joe Biden’s victory in the US election eases “geopolitical tail risk” for the lender.
HSBC’s shares have also been rising since its biggest shareholder, the Chinese mainland’s Ping An Insurance Group Co, raised its stake in the lender.
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