HSBC shares surge on optimism turnaround will build steam

[HONG KONG] HSBC Holdings shares surged as much as 8 per cent in Hong Kong trading on optimism a turnaround at Europe's biggest lender is gathering steam amid an economic recovery in China.

The shares rose 6.8 per cent to HK$42.45 as of 10.51am in Hong Kong, paring this year's decline to 30 per cent. They gained 4.1 per cent 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. "Its valuation is also attractive so a catch-up rally is possible."

The rally comes as Hong Kong's leader Carrie Lam could announce several plans to support support integration in the Greater Bay Area, a key region for expansion for HSBC. Ms Lam also plans to expand the scope of the Stock Connect programme with mainland exchanges to include shares of secondary-listed companies and biotech firms, Sing Tao reported, citing unidentified people.

The London-based bank beat profit estimates for the third quarter, delivering an upside surprise as it pared back expected credit losses and signalled it may resume limited dividend payments already for this year.

The recent rise in HSBC's shares has been supported by better-than-expected third quarter results, easing geopolitical tail risk with Joe Biden's victory in the US election and a rising probability of dividend resumption, JPMorgan Chase & Co said in a note on Monday.

Goldman Sachs Group on Tuesday reinstated HSBC with a buy rating.

HSBC's shares have also been rising since its biggest shareholder, China's Ping An Insurance Group, raised its stake in the lender.

BLOOMBERG