US Business

HSBC on Monday said pre-tax profit fell in the first half of 2022 but it intends to resume quarterly dividends next year as its annual outlook remained positive.

The firm said it made US$9.175 billion before tax, down more than 15 percent on-year.

Chief executive Noel Quinn said “it reflected a more normalised level of expected credit losses compared with the Covid-19 releases made last year, as well as the macroeconomic impact of the Russia-Ukraine war”.

The annual revenue outlook was positive, he said, as net interest income is expected to reach at least US$31 billion this year and US$37 billion next year as global interest rates rise.

Quinn said the group is confident of achieving its best returns in a decade in 2023.  

“We also intend to revert to quarterly dividends in 2023,” he added.

London-headquartered HSBC was among a number of major banks to cancel their dividends early in the pandemic following a de facto order from the Bank of England — a move that upset some Hong Kong shareholders.

The plan to resume payout came before HSBC executives’ first face-to-face meeting with shareholders Tuesday from the Asian financial hub in three years. 

The executives are expected to field questions about a restructuring bid from its biggest shareholder Ping An Insurance Group.

The lender is under pressure from Ping An, which has a 9.2 percent stake, to spin off its Asian operations, in a bid to unlock shareholder value amid tensions between China and the west.

Quinn and chairman Mark Tucker have not publicly commented on Ping An’s campaign, but the bank has hinted it wants to keep its current structure while continuing a pivot to Asia, Bloomberg reported. 

Hong Kong politician Christine Fong said on Sunday tht HSBC separating its Asian business and bringing back its primary listing to the city is the “best way to protect (the interests of) minority shareholders”.

Fong, who reportedly represents 500 small investors in HSBC stock, also voiced support for Ping An getting seats on HSBC’s board, citing the cancelled dividends in 2020 as a reason.

Last year, HSBC vowed to accelerate a multi-year pivot to Asia and the Middle East, with ambitions to lead Asia’s wealth management market.

The bank said it would invest $6 billion in Hong Kong, China and Singapore and hire more than 5,000 wealth advisers — while slashing 35,000 jobs and cutting its retail operations in the United States and France. 

HSBC has commissioned Goldman Sachs and advisory firm Robey Warshaw to rebuff Ping An’s campaign, according to Bloomberg.

Chinese e-commerce giant Alibaba led technology stocks lower in Hong Kong on Monday after US authorities put it on a watchlist that could see it delisted in New York if it does not comply with disclosure orders.

The market heavyweight sank more than five percent in early trade, pushing it to its lowest level since May and dragging the Hang Seng Tech Index with it. 

The US securities watchdog on Friday said it added the Chinese firm to a list of more than 250 others that could be booted from Wall Street — where it listed in 2014 — if strict auditing requirements were not met for three consecutive years.

The announcement comes as tensions between Washington and Beijing are dragged lower by a range of issues including technology, human rights and Taiwan.

It also follows a report last week that founder Jack Ma plans to give up control of Ant Group as part of a strategy to appease Chinese regulators and revive the digital payments unit’s initial public offering.

The firm has come under intense pressure from a crackdown on the tech sector by Chinese authorities for more than a year, sending its share price plunging about 70 percent from its record high in late 2020.

It was hit with a record $2.75 billion fine in April 2021 for anti-competitive practices.

Earlier this year, Alibaba removed all executives linked to Ant from Alibaba Partnership, a group that can nominate the majority of Alibaba’s board.

Reports about Ma’s decision wiped out Alibaba’s gains from earlier in the week, when the firm announced it would seek a primary listing in Hong Kong to better access China’s vast pool of investors.

The selling — it sank more than 10 percent in New York — was made worse by concerns about Alibaba’s upcoming earnings report, which many fear will show its first ever drop in quarterly revenue.

A unit of embattled Chinese developer Evergrande has failed to repay its loans and must pay a guarantor $1.1 billion, the company said in a Hong Kong stock exchange filing.

Evergrande has been involved in restructuring negotiations after racking up $300 billion in liabilities in the wake of Beijing’s crackdown on excessive debt and rampant speculation in the real estate sector.

The announcement comes after the company failed to publish a “preliminary restructuring proposal” by the end of July, despite assuring creditors it was on track to meet the deadline.

Evergrande said Friday it had made “positive progress” in its restructuring process, floating the potential use of equity in its offshore subsidiaries to repay bondholders but falling short of providing concrete details.

And on Sunday, the company said subsidiary Evergrande Group (Nanchang) had failed to fulfil its debt obligations to an unnamed third party. 

Evergrande Nanchang had provided counter-guarantees in the form of a pledge of 1.3 billion shares in Shengjing Bank that it held, according to the filing.

“As the borrowers failed to repay the loans, the applicant carried out its obligations under the guarantee and claimed against the subsidiary,” it said.

It noted that the guarantor has priority to receive compensation from the sale of the shares, and that the scope covers the amount paid by the applicant (7.3 billion yuan).

Evergrande, a major name in China’s property sector, has in recent months scrambled to offload assets, with chairman Hui Ka Yan paying some of its debts using his personal wealth.

It has since found a potential buyer for its Hong Kong headquarters, according to media reports.

Its woes are emblematic of the problems rippling across China’s massive property sector, with smaller companies also defaulting on loans and others struggling to raise cash.

With developers strapped for finances and projects stalling, furious homebuyers in dozens of cities have also begun refusing to pay their mortgages.

“The central government needs to take strong and credible measures to ensure stalled projects are finished and delivered” to restore confidence, said Andrew Batson of Gavekal Dragonomics in a recent report.

“The problem is mostly a political one: the leadership has committed significant political capital to strict property policies over the past few years,” he added.

“Can the government accept the embarrassment of such an obvious reversal… probably yes, but the risk is that it takes a while to get there.”

Ukraine said the “brutal” shelling by Moscow so far of the southern city Mykolaiv killed a grain tycoon Sunday, as Russia claimed an attack from a drone wounded six personnel at the headquarters of its Black Sea fleet. 

AFP journalists witnessed intense Russian bombardment of the eastern town of Bakhmut after Ukrainian President Volodymyr Zelensky called for civilians to leave the front line Donetsk region bearing the brunt of the Kremlin’s offensive.

Authorities in Ukraine’s southern city of Mykolaiv said Sunday that widespread Russian bombardments overnight killed at least two civilians.

“Today, one of the most brutal shellings of Mykolaiv and the region over the entire period of the full-scale war took place. Dozens of missiles and rockets,” Ukrainian President Volodymyr Zelensky said in an address.

“I want to thank every resident of Mykolaiv for their indomitability.”

Ukrainian agricultural magnate Oleksiy Vadatursky, 74, and his wife Raisa were killed when a missile struck their house, authorities said.

Vadatursky owned major grain exporter Nibulon and was previously decorated with the prestigious “Hero of Ukraine” award.

Zelensky offered condolences and paid tribute to Vadatursky in his Sunday address.

Mykolaiv — which has been attacked frequently — is the closest Ukrainian city to the southern front where Kyiv’s forces are looking to launch a major counter-offensive to recapture territory lost after Russia’s February invasion. 

– Drone attack –

Russian authorities in the Crimean Black Sea peninsula — seized by Moscow from Ukraine in 2014 — said a small explosive device from a commercial drone, likely launched nearby, hit the navy command in Sevastopol.

The local mayor blamed “Ukrainian nationalists” for the attack that forced the cancellation of festivities marking Russia’s annual holiday celebrating the navy.

But Ukraine’s navy accused Russia of staging the attacks as a pretext to cancel the festivities.

The claim and counterclaim came as the dispute over which side struck a jail holding Ukrainian prisoners of war in Kremlin-controlled Olenivka, rumbled on, with Kyiv and Moscow trading blame. 

Russia’s defence ministry said Sunday it had invited the International Committee of the Red Cross (ICRC) and the United Nations to visit the site “in the interests of an objective investigation”. 

But the ICRC said Sunday it had yet to receive approval to enter the site.

Russia’s military said 50 Ukrainian servicemen died, including troops who had surrendered after weeks of resisting the bombardment of the Azovstal steelworks in the port city of Mariupol.

Ukraine says Russia was behind the attack, with Zelensky accusing Moscow of the “deliberate mass murder of Ukrainian prisoners of war”.

– Intense bombardments –

AFP journalists on Sunday saw one wounded man collected by an ambulance after a ferocious bombardment of the town of Bakhmut in the Donetsk region where Russia is focusing its firepower.

Zelensky warned on the weekend that thousands of people, including children, were still in Donetsk’s battleground areas.

He urged people to leave the besieged region, echoing calls from the authorities in recent weeks to evacuate.

“Leave, we will help,” Zelensky said. “At this stage of the war, terror is the main weapon of Russia.”

Official Ukrainian estimates put the number of civilians still living in the unoccupied area of Donetsk at between 200,000 and 220,000.

A mandatory evacuation notice posted Saturday evening said the coming winter made it a matter of urgency, particularly for the more than 50,000 children.

Kateryna Novakivska, a deputy commander of a Ukrainian unit, said she was fighting so her comrades could be reunited with their families.

“The morale of our servicemen is at a high level now, but everyone wants to visit their homes, see their relatives and loved ones,” she said.

The intense bombardments around Ukraine come as the authorities push to restart grain exports under a plan brokered by the UN and Turkey to lift a Russian naval blockade. 

A spokesman for the Turkish presidency said there was a “high probability” that a first ship carrying Ukrainian grain could leave Ukraine on Monday.

Asian markets were mixed Monday and oil fell as investors assessed data showing further weakness in China’s economy and comments from Federal Reserve officials showing it was wedded to its campaign of interest rate hikes to fight inflation.

A strong set of earnings from Wall Street titans Amazon and Apple helped US markets end last week with healthy gains and eased concerns about the impact on consumers of surging inflation and rising borrowing costs.

That came after investors took Fed chief Jerome Powell’s post-policy-meeting comments Wednesday as indicating the bank could start to slow down its pace of monetary tightening, providing a much-needed boost to stocks.

However, analysts warned that inflation would take time to come down from its four-decade highs and there were undoubtedly more rate hikes to come.

And officials backed that up at the weekend, with Minneapolis Fed chief Neel Kashkari telling the New York Times that he was “surprised by markets’ interpretation” of the latest Fed meeting statement.

“The committee is united in our determination to get inflation back down to two percent, and I think we’re going to continue to do what we need to do until we are convinced that inflation is well on its way back down to two percent — and we are a long way away from that.”

That came as Atlanta Fed president Raphael Bostic said he did not think the economy was in recession owing to ongoing jobs growth but that inflation remained too high and he was “convinced” more must be done.

Still, Treasuries continued to fall, with the 10-year yield at 2.67 percent, well down from June’s peak near 3.50 percent, suggesting expectations for future rates are easing. 

Figures showing a second successive economic contraction in April-June put the United States in a technical recession but it is not officially considered so until identified as such by the National Bureau of Economic Research.

In early Asian trade, investors struggled to extend Wall Street’s lead, with Hong Kong and Shanghai suffering most after another disappointing reading on the Chinese economy.

The closely watched Purchasing Managers’ Index of manufacturing activity shrank in July on the back of weak demand and the strict zero-Covid measures imposed in parts of the country.

While sweeping Covid curbs have eased in major cities such as Shanghai and Beijing, sporadic lockdowns in various cities and towns have kept businesses and consumers worried.

And there are few signs of an easing of the policy, with officials appearing to emphasise zero-Covid over growth in a Politburo meeting last week.

Adding to weakness in Hong Kong was news that US authorities had put market heavyweight Alibaba on a list of firms threatened with New York delisting if they did not comply with disclosure rules.

There were also losses in Taipei and Manila.

However, Tokyo, Sydney, Seoul, Singapore, Jakarta and Wellington edged up.

The data out of China revived demand concerns on oil markets, sending both main contracts down Monday, following a bounce last week.

Brent and WTI both lost more than one percent, and investors are now eyeing a meeting of OPEC and other major producers this week, where they will discuss their deal to raise output slowly.

Joe Biden called on Saudi Arabia to open the taps further when he visited last month as he tries to address a crucial driver of inflation around the world.

But the kingdom does not appear to have made any such moves so far with the commodity having lost almost all the gains made since Russia’s Ukraine invasion.

“The US has expressed optimism about the potential for an OPEC+ supply response, said SPI Asset Management’s Stephen Innes.

“However, it seems highly unlikely there will be much appetite for a significant increase in production, with Brent still (around) 15 percent down from year-to-date highs and (down) 12 percent in the last month,” he added.

“OPEC+ seems more likely to signal a willingness to continue cooperating long-term, but it would be a surprise if the upcoming meeting resulted in a significant policy shift.”

– Key figures at around 0230 GMT –

Tokyo – Nikkei 225: UP 0.5 percent at 27,933.27 (break)

Hong Kong – Hang Seng Index: DOWN 1.0 percent at 19,948.11

Shanghai – Composite: DOWN 0.3 percent at 3,243.32

Euro/dollar: UP at $1.0238 from $1.0228 Friday

Pound/dollar: UP at $1.2191 from $1.2189 

Euro/pound: UP at 83.98 pence from 83.89 pence

Dollar/yen: DOWN at 132.47 yen from 133.25 yen

West Texas Intermediate: DOWN 1.3 percent at $97.34 per barrel

Brent North Sea crude: DOWN 1.1 percent at $102.85 per barrel

New York – Dow: UP 1.0 percent at 32,845.13 (close)

London – FTSE 100: UP 1.1 percent at 7,423.43 (close)