HSBC shares fall to one-month low in biggest dive in a year

Hong Kong-listed shares of HSBC Holdings Plc fell more than 5 percent on Tuesday, the biggest single-day decline in almost a year after Europe's biggest bank cut its profitability target citing the cost of tougher banking regulations.

HSBC, the session's most actively traded stock, dropped as much as 5.4 percent to HK$85.50, its lowest intraday level since February 1, when the shares fell to HK$84.7. By the midday trading break it was down 4.8 percent, compared with the benchmark Hang Seng Index's .HSI 0.06 percent gain.

The sharp decline followed a 4.65 percent drop in its London-listed shares on Monday.

Unless the bank can show us some good growth prospects or tell us what sort of aggressive plan it has to boost growth, earnings growth for this year is expected to be slower and unexciting, said CASH Asset Management director Patrick Yiu. What it can do is control costs better.

Investors were turning to Chinese financial stocks for better returns, lifting Industrial and Commercial Bank of China Ltd 1.3 percent and Ping An Insurance (group) Co of China Ltd 1.5 percent.

A dividend yield of less than 3 percent was not attractive to investors when the shares were trading above HK$90, Yiu said, adding that the yield edged higher after the morning selloff.

On Monday, HSBC (HSBA.L) said its 2010 pretax profit more than doubled from 2009 to $19 billion, but that fell short of an average forecast of $20 billion from analysts polled by Reuters Estimates.

Its new Chief Executive Stuart Gulliver cut the bank's long-term return on equity (RoE) target to 12-15 percent from a previous target of 15-19 percent as the cost of retaining more capital to make banks safer takes its toll.