British Virgin Islands

Sunday, Jan 24, 2021

If HSBC shareholders are patient, they will reap rewards when coronavirus crisis comes to an end

If HSBC shareholders are patient, they will reap rewards when coronavirus crisis comes to an end

Suspending dividends will help ensure banks have more liquidity to weather the financial storm, which will benefit shareholders in the longer run. Dividend payouts are not an entitlement anyway

To those people moaning about the non-payment of dividends by HSBC and Standard Chartered Bank, I say this: there are varying degrees of risk in investing in the stock market. There is no entitlement. The aim of the Bank of England in directing UK banks to suspend dividends is to help ensure that banks have sufficient liquidity to assist businesses to weather the storm in the current difficult financial climate, and to help those businesses to retain jobs.

Those moaning investors that hold 10,000 or 20,000 bank shares should be able to afford to make sacrifices for the common good. I suggest that those investors hold on to their bank shares to take advantage of the inevitable rise in their value when the Covid-19 crisis ends, as it surely will.

Eric Taylor, Sai Kung

Demand for bonus shares displays a lack of understanding

Recently, many British banks, including HSBC, have halted dividend payments and/or repurchases of stocks to address the impact of the Covid-19 outbreak.

Quite a number of HSBC shareholders were dismayed and even angered by the bank’s decisions, claiming that HSBC must pay their dividends as before, or offer bonus issues. They even have threatened legal action against the bank. As a student studying accounting and investment for a long time, I am amused by these investors’ absurd actions.

I would like to emphasise some basic principles about shares. First, unlike coupon payment of debentures, dividend to ordinary shareholders is simply not obligatory.

Second, can issuing bonus shares bring true benefit to these shareholders? Unfortunately, no. Issuing bonus shares is just an accounting trick. You have more shares from the firm, but the value behind each share also decreases correspondingly, which is similar to cutting a pizza into smaller pieces.

If investors ignore the rules of finance, that is their loss.


Quote of the Day

Capitalism has been called a system of greed—yet it is the system that raised the standard of living of its poorest citizens to heights no collectivist system has ever begun to equal, and no tribal gang can conceive of.

Ayn Rand
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