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Covid-19: HSBC / SC - Dividends & Results

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  1. #31

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    I think that it is relatively stable in certain ways and you have some transparency on the weaknesses in the loans and their inability to do anything with their brand is priced in (I think). Lots of liquidity so if your catalyst doesn't materialize you can get out pretty quick.

    I think I'd start looking at it if it falls to HKD18 (maybe buy at HKD12 depending on the reason for the share price drop) but even at HKD37 I think it has problems going forward because it's so crappy and unchanging compared to alternative banks or other sectors even.

    I think you would buy, collect your dividend, and pray for that super CEO to utilize HSBC's large reach/brand and do something amazing/profitable. Maybe to do with tech or a streamlined business or some sort of new fangled business model - so I guess you'd pray on optionality.

  2. #32

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    Its far too bloated with local unemployable staff to be investing in.

    Its now a takeover target by a CCP supported bank...for that reason if you hold stock then retain.

    There is no way that they could get away with a capital call from shareholders..who would underwrite it?

    They certainly need to start this restructure asap...not delay it.

    Last edited by shri; 03-04-2020 at 08:51 AM.

  3. #33

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    I think you would buy, collect your dividend, and pray for that super CEO to utilize HSBC's large reach/brand and do something amazing/profitable. Maybe to do with tech or a streamlined business or some sort of new fangled business model - so I guess you'd pray on optionality.
    Me thinks people have been waiting for about 5+ years for this to happen.

    I do agree with the implications of the dividend drop, specially given the demographics of their shareholders both in HK and the UK. Continuing to hear stories of older people who bought in/doubled down at 40ish to get a good dividend.

  4. #34

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    The new CEO isnt the answer...an external CEO was needed, with Quinn they will simply get more of the same..prediction he will be gone within 2 years.


  5. #35

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    Quote Originally Posted by shri:
    Me thinks people have been waiting for about 5+ years for this to happen.

    I do agree with the implications of the dividend drop, specially given the demographics of their shareholders both in HK and the UK. Continuing to hear stories of older people who bought in/doubled down at 40ish to get a good dividend.
    They could be waiting forever - odds of that type of CEO being hired by a bank like HSBC is very slim. I don't really see it, but I feel that this type of "hope" is priced in. It's core business is fine imo but the bank is overvalued if you consider just that core business.

  6. #36

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    Quote Originally Posted by Viktri:
    I don't own shares of HSBC but I think there's something morally wrong with what the Bank of England is doing to HSBC's dividend.

    The Bank of England is effectively directing HSBC's cash literally away from shareholders to UK businesses. The BoE does not have a controlling stake in HSBC. HSBC, to my knowledge, has also not asked for a bailout or handout from the UK government.

    If the idea is to have HSBC lend more to small businesses in the UK, why not follow the US fed and temporarily remove reserve ratios or whatever it is that constrains bank capital? What am I missing here?

    A lot of retail shareholders in Hong Kong still depend on the dividend from HSBC. In the recent past there was an inspirational article (that I read on GeoExpat) about a taxi driver who saved money to purchase HSBC shares and live off of the income. Now what can he do? The share price is low so selling would be a terrible idea but he has lost his monthly income. Getting a part-time job in this environment is also unlikely.
    Just to zoom out a bit on the dividends point, I think a lot of mental accounting is at work when we create this huge distinction between selling shares at lows for cash (bad!) or to receive the dividend during a crash (good!) when it's just a zero sum game on a total return basis between dividends paid or capital gains. Divs are just forced sales since the stock price drops by the same amount, so your hypothetical investor is no better or worse off selling shares low or receiving the dividend, especially in a frictionless tax environment like HK.

    I understand that's not how we psychologically perceive it and there's a practical convenience in not having to log in to the account and manually sell. But this idea that "I'm not selling low so at least I still have the same number shares" while failing to see receiving a dividend is also a forced sale while the market is down is flawed IMO. It's taking from one hand to give the other.

    This outlines this psychological preference some more.
    https://www.forbes.com/sites/dirkcot.../#13c06cd4732e
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  7. #37

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    Quote Originally Posted by foxwendal:
    Just to zoom out a bit on the dividends point, I think a lot of mental accounting is at work when we create this huge distinction between selling shares at lows for cash (bad!) or to receive the dividend during a crash (good!) when it's just a zero sum game on a total return basis between dividends paid or capital gains. Divs are just forced sales since the stock price drops by the same amount, so your hypothetical investor is no better or worse off selling shares low or receiving the dividend, especially in a frictionless tax environment like HK.

    I understand that's not how we psychologically perceive it and there's a practical convenience in not having to log in to the account and manually sell. But this idea that "I'm not selling low so at least I still have the same number shares" while failing to see receiving a dividend is also a forced sale while the market is down is flawed IMO. It's taking from one hand to give the other.

    This outlines this psychological preference some more.
    https://www.forbes.com/sites/dirkcot.../#13c06cd4732e
    I also studied this in school but empirical evidence doesn't support your argument. You can look up the literature on how stocks behave on ex-dividend days but the real world is more complicated than the theoretical. I have heard one explanation to what you're saying that appeared reasonable: that the theoretical ex-dividend decrease exists only for a moment in time (beginning of the day) and that after that period of time other new factors of information come into play.

    I don't agree with the tax inefficiency explanation - anyone who's done the math knows that it doesn't match.


    example: The behavior of stock price on ex-dividend day
    https://www.diva-portal.org/smash/ge...FULLTEXT03.pdf
    The paper discusses its own research but also other research that all show the theoretical "dividends are the same as selling shares" isn't borne by real world data.

    There's some research done on HK's market
    https://www.omicsonline.org/open-acc...5.php?aid=4220
    The Price Drop Puzzle on the Ex-dividend Day



    In the Hong Kong stock market, where neither dividends nor capital gains are taxed, Frank and Jagannathan [4] claim that this trading behavior can explain a price drop versus dividend discrepancy that is equal to the bid-ask bounce (“bid-ask bounce hypothesis”). Both microstructure hypotheses directly challenge the “tax clientele hypothesis” in that they introduce explanations for the ex-day anomaly that are not related to taxes. Nevertheless, Graham et al. [5], and Jakob and Ma [6] examine the effect of changes in price quotation and find no support for microstructure explanations.
    Last edited by Viktri; 03-04-2020 at 01:07 PM.
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  8. #38

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    I agree that it rarely falls exactly the same amount as the dividend paid since, as you said, many other factors contribute to price changes daily. The dividend is but one variable thrown in that complex mix, and it’s hard to isolate. But this doesn’t mean it’s not priced in.

    And I don’t think it has to be that abstract either. In a crude example, if you gave away 100k cash to charity, your net worth simultaneously drops by 100k. For some reason we don’t naturally apply the same reality to companies when they also give away cash. But when company ABC gives away 100,000,000 cash to shareholders, it’s book value is instantly worth 100,000,000 less too and should be one of the things factored in by people who want to buy the company.

    I concede transaction frictions may mean the price drop may not be perfect. But if we assume your scenario is true and that stock price doesn’t fall the full amount of the dividend (again, amongst all other variables affecting price) or even at all, then what’s to stop someone from simply buying the stock just before ex-date, selling right after, and simply collect the dividend as the profit if indeed the stock price doesn’t adjust? That scenario would be exploited by traders until it eventually had to be true.


  9. #39

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    @foxwendal - arent dividends (when declared) a liability on the companies book (i.e. they're payables...)?

    Going back to the specific case of HSBC... they wiped out a liability.


  10. #40

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    Prevailing literature suggests that the information effect (ie: new information on the same day as the ex-dividend) affects the price so that the theoretical calculation (as you've alluded to in your previous post) is only reached for a moment.

    The reason that traders don't take advantage of this issue is because there's nothing to take advantage. The share price could be higher OR lower than the expected ex-dividend price. There's nothing to take advantage of in this case.

    Quote Originally Posted by foxwendal:
    I agree that it rarely falls exactly the same amount as the dividend paid since, as you said, many other factors contribute to price changes daily. The dividend is but one variable thrown in that complex mix, and it’s hard to isolate. But this doesn’t mean it’s not priced in.

    And I don’t think it has to be that abstract either. In a crude example, if you gave away 100k cash to charity, your net worth simultaneously drops by 100k. For some reason we don’t naturally apply the same reality to companies when they also give away cash. But when company ABC gives away 100,000,000 cash to shareholders, it’s book value is instantly worth 100,000,000 less too and should be one of the things factored in by people who want to buy the company.

    I concede transaction frictions may mean the price drop may not be perfect. But if we assume your scenario is true and that stock price doesn’t fall the full amount of the dividend (again, amongst all other variables affecting price) or even at all, then what’s to stop someone from simply buying the stock just before ex-date, selling right after, and simply collect the dividend as the profit if indeed the stock price doesn’t adjust? That scenario would be exploited by traders until it eventually had to be true.

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