HONG KONG - HSBC’s mom and pop investors are picking an odd time for a fight. Hong Kongers are rallying against the British bank for halting dividends: a Facebook page to discuss potential action, including calls for an extraordinary general meeting and legal proceedings, had over 3,400 members as of Monday. The lender has complex ties with the Asian hub, where it makes most of its profit. But at a time of profound global uncertainty, the agitation lacks class.

Several London-listed lenders scrapped 2019 dividend payouts on Tuesday, following pressure from the UK regulator to hold the capital as a buffer against expected losses from the pandemic. Roughly $4 billion was due to come from HSBC. The decision to withhold the payouts angered top executives and even reopened the debate on whether the bank should redomicile in Hong Kong, where 35% of its customer accounts are held, the Financial Times reported last week.

Still, anger from retail investors appears short-sighted. Hong Kong could certainly do with more grassroots activism: the city doesn’t have a class-action lawsuit system for minority investors to sue companies. Instead it relies on shareholder activists like David Webb, who campaigned to stop Kerry Properties being taken private on the cheap in 2003 during the SARS outbreak. And much of the rest is left to larger outfits like Elliott Management and Oasis Management.

But HSBC is also the biggest provider of credit cards and mortgages in Hong Kong and a big lender to small businesses, which were already under financial strain after pro-democracy demonstrations forced many to close last year. Local authorities recently implemented fresh social distancing measures in the face of a second wave of Covid-19 infections. The pain there could be worse than previously expected.

Retail investors could succeed in calling an EGM, and that would provide a forum to air ongoing complaints about the group’s structure. But HSBC can withdraw payouts as and when it pleases. Banks risk bigger problems flying in the face of their regulators. Hong Kong’s emboldened retail investors could do worse than to focus on that.

CONTEXT NEWS

- HSBC shareholders in Hong Kong are considering calling for an extraordinary meeting and taking possible legal action against its scrapping of dividend payments, Reuters reported on April 5.

- The bank and other large British lenders on March 31 announced the suspension of payouts in a co-ordinated industry response to a request from the regulator to save their capital as a buffer against expected losses from the economic fallout from the coronavirus pandemic.

- HSBC has a large number of small retail investors in Hong Kong who have long benefited from the bank’s stable stream of dividend payments. Some of them have created a dedicated Facebook page, which had more than 3,000 members as of April 5, to discuss potential action.

(Editing by Una Galani and Sharon Lam)

© Reuters News 2020