TO SAY that the Hong Kong Stock Exchange lives and dies with HSBC Holdings, which accounts for nearly one-third of the value of the benchmark Hang Seng index. So far this month, the entire market has been living large. The bank's recent strength helped to lift the entire Hong Kong index to its highest level since October 1997. There are several reasons to think it will - or at least hold its value better than most counters if the entire Hong Kong market drops. The announcement seemed to kick start the company's stock.
Analysts cite several factors behind the rally.
HSBC, which is already traded in London as well as Hong Kong, is slated to be listed on the New York Stock Exchange in June, which should add liquidity and provide a new point of comparison as to whether the stock price is inflated. But by U.S. standards, the stock price is merely average among banks. Giant Citigroup, for example, is now trading at a PE of nearly 29. Most U.S. banks are trading in a range between 18 and 25. Rumors that HSBC would launch a share buyback also have boosted the stock, says analysts, but the most important factor has been the company's regional shopping trip.