HONG KONG Shares of HSBC jumped more than 4 percent on Monday to five-week highs after its massive rights issue received a robust response from investors.
By 11:30 p.m. EDT, the stock was up 3.4 percent at HK$51.15, after earlier rising to HK$51.70 -- its highest level since it announced the cash call on March 2. HSBC shares have soared 62 percent from the 14-year lows of HK$30.55 hit four weeks ago.
"The markedly improved global investor sentiment post-G20 and the slew of strong U.S. data in recent days have helped HSBC to a great extent," said Alex Tang, research director at Core Pacific-Yamaichi International. Tang called the response to HSBC's cash call "excellent."
HSBC investors bought 96.6 percent of the shares offered in its record $18.9 billion rights issue, Europe's biggest bank said on Sunday. Demand in Hong Kong -- where HSBC is a market darling and referred to as "big elephant" -- was 98.2 percent.
HSBC said it had sold 4.89 billion shares to existing shareholders and expects to sell the 172.7 million shares not taken up -- or the "rump" -- on Monday.
The stock underperformed the broad market in early trading in Hong Kong as the bank unloaded some of the unsubscribed rights shares, which were priced at a deeply discounted HK$28, two brokers said. More than 842 million HSBC shares had changed hands in the first hour of trading on Monday.
HSBC's shares are expected to come under some selling pressure when the new shares begin trading on Thursday.
Brokerage house CLSA said it maintained its negative view on HSBC, attributing the recent share surge to a short squeeze in global bank stocks as opposed to a fundamental improvement in the U.S. or UK economy.
"The stock is trading at 1.1 times price-to-tangible-book versus 0.6 times for the U.S. banks and 0.3 times for the UK banks," Daniel Tabbush, an analyst with CLSA, said on Friday.
(Reporting by Parvathy Ullatil; Editing by Muralikumar Anantharaman)