Hong Kong investors warn of action over HSBC dividends

Many retail investors rely on the HSBC's dividends for income

Retail investors in Hong Kong have threatened legal action against HSBC and will attempt to force the bank to hold an extraordinary general meeting, after it was pressured by UK regulators to cancel its dividend due to the coronavirus crisis.

The controversy surrounding the suspension of HSBC's annual payout to shareholders for the first time in nearly 75 years has again highlighted the lender's complicated situation in Hong Kong, where it derives most of its profits before tax.

Individual HSBC shareholders in the Asian financial hub — ranging from wealthy business people to low-income earners — have banded together in an attempt to reach the threshold of 5 per cent of outstanding shares required to secure an EGM.

"The decision [to withhold dividends] is unreasonable, this is about gathering Hong Kong people who have held the shares for a long time and fighting for our rights," said office clerk Raymond Tang, a member of a large Facebook group dedicated to the cause.

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A third of London-headquartered HSBC's shares are owned by retail investors in Hong Kong. Many rely on the bank's dividends for income.

They rely on the dividend to pay for their living expenses after their retirement, so this will actually hurt them a lot

Matthew Chung, Surich Asset Management

The bank was one of five UK-based lenders that last week bowed to pressure from the UK's Prudential Regulation Authority to withhold its annual dividend due to the coronavirus pandemic, which has badly damaged the British economy.

That has reignited the debate over whether HSBC's headquarters should move to Asia, where it makes most of its revenue.

The Hong Kong retail investor collective has also threatened to sue HSBC in the city's courts over the dividend issue. The group has about 2,700 members on Facebook but it is not clear how many shares in HSBC they control. They want to use the EGM to discuss ways to insulate HSBC's Hong Kong business from UK regulators.

At least 200 of the retail shareholders are being advised by Surich Asset Management, according to Simon Yuen, the Hong Kong-based investment group's founder.

Surich itself does not own shares in HSBC.

"Many of them use this as their retirement plan. They rely on the dividend to pay for their living expenses after their retirement, so this will actually hurt them a lot," Matthew Chung, an adviser at Surich, said of the payout suspension.

Noel Quinn, HSBC chief executive, last week sent an apology to the bank's Hong Kong shareholders following the cancellation of the dividend, saying it did not take them for granted.

It is the second time in several months that HSBC, which is so synonymous with the city it is still known by many locals as the Hong Kong bank, has angered parts of the community.

Anti-government protesters in the Chinese territory last year vandalised HSBC's branches and ATMs after the lender closed an account used to raise funds for demonstrators, citing money laundering rules. Protesters accused the bank of siding with Beijing during Hong Kong's biggest political crisis in decades.

An HSBC spokeswoman said the bank "deeply regrets" any harm caused by the suspension of the dividend, reiterating the move was at the request of UK regulators.

Written by: Primrose Riordan and Nicolle Liu

© Financial Times