United Kingdom

MARKET REPORT: Chinese ramp up stake in HSBC

HSBC shares enjoyed their best daily surge for more than a decade after a Chinese investor ramped up its stake in the embattled British bank. 

The lender's stock jumped as much as 11 per cent higher at one point yesterday after insurance giant Ping An increased its holding from 7.95 per cent to 8 per cent. 

It was a much-needed shot in the arm for HSBC, which has come under fire over money laundering claims and its support for draconian security laws in Hong Kong. Yesterday the bank's shares rose by 8.9 per cent, or 25.2p, to 308.55p, the biggest daily rise since 2009. 

They had previously slumped to 25-year lows after the bank was accused of allowing Ponzi scheme fraudsters to continue moving money around even after it raised red flags about their activities. 

The bank's support for the controversial laws in Hong Kong – imposed by the Chinese Communist regime in Beijing – has also drawn criticism from Washington. 

Mike Pompeo, the US Secretary of State, accused HSBC last month of aiding 'political oppression' by China, criticising its alleged denial of bank accounts to some protesters. 

The fresh investment by Ping An will be seen as a vote of confidence in the bank. However, it was claimed yesterday the move was primarily linked to hopes it will resume its dividend next year after cancelling it due to the pandemic. 'If you believe the dividend will be resumed next year, then the shares look attractive at these levels,' one source told the Financial Times. Ping An said its move represented 'a long-term financial investment'. 

The rise in HSBC shares also helped lift rival Standard Chartered, which also has big exposure to Asia, by 7.5 per cent, or 25.2p, to 362p. UK lender NatWest rose 7.7 per cent, or 7.68p, to 107.3p as well, while Lloyds Banking Group rose 7.6 per cent, or 1.88p, to 26.6p and Barclays rose 7.1 per cent, or 6.45p, to 98p. 

That all contributed to the FTSE100 making a healthy gain of 1.46 per cent, or 85.26 points, to close at 5927.93. Its smaller sibling, the FTSE250 index of mid-sized companies, closed up 1.91 per cent, or 326.15 points, at 17370.27. 

The indices were perhaps boosted by optimistic reports that UK-EU trade talks in Brussels could finally yield a breakthrough this week. 

Back in Blighty, there was also upbeat news from newspaper publisher Reach, which beat analyst expectations for first-half profits. The company, which owns the Mirror and Express titles, said online advertising had performed strongly while demand for print ads was also returning. Newspaper advertising sales have been hit hard by the pandemic, as struggling companies slash spending on marketing to bolster their finances, while working from home rules have also hit sales to commuters at shops in train stations. 

Reach said the Covid-19 crisis posed a 'significant challenge' but the situation had improved as lockdown restrictions were eased. 

However, for the 26 weeks to June 28, the company's revenues fell from £352.6m to £290.8m and profits fell from £58.2m to £25.2m.

Despite the falls, however, Reach's shares leapt 17.2 per cent, or 11.1p, to 75.6p as analysts said the numbers were not as grim as expected. 

Tobacco giant Imperial Brands was almost flat after the firm delayed its £1.1billion sale of its premier cigar business. 

The sale to Gemstone Investment and Allied Cigar Corporation will take place on October 29, after the Covid-19 pandemic slowed down the process. 

The deal was announced in April and will bring Imperial's 12-year ownership of the cigar business to a close. Following the announcement, shares edged up 0.4 per cent, or 5p, to 1401p.

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