HSBC’s dividend cancellation fiasco revealed underlying issues with Hong Kong's retail investors ranging from lacking financial knowledge to unhealthy social dependency.
In a sea of listed companies globally that have understandably scrapped dividends to bolster balance sheets and stay afloat – including fellow U.K.-based lenders – HSBC has been singled out by its retail investors in Hong Kong which owns around one-third of its total shares.
From irrational outrage to heartbreaking desperation, the responses from the group revealed underlying issues ranging from lacking financial knowledge to unhealthy social dependencies. These lessons are being taught in harsh times but will hopefully leave Hong Kong’s retail investors stronger for the long run.
Stocks Are Not Bonds
One investor surnamed Wong reportedly cried at a media briefing questioning how a big bank like HSBC could «lie to a small shareholder like her» after she bought 10,000 shares on February 27 for high dividends before the Bank of England’s orders. Such issues of «mistrust» are echoed by other shareholders which are considering legal action despite having no case whatsoever.
Unlike coupon payments from bonds, dividend payments from stocks are not obligatory and are paid at the discretion of the issuing company. And in addition to this «default» misperception, some shareholders have even demanded bonus shares from new issuance further demonstrating lacking financial knowledge about dilution risk.
«[D]on't waste your money on legal action, you have no case,” said activist investor David Webb, underlining that HSBC directors acted legally when scrapping dividends.
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