Struggling banking giant HSBC Holdings PLC, seeking $17.7 billion in fresh capital, sought Tuesday to reassure nervous investors after a dramatic plunge in its share price that sparked a Hong Kong securities watchdog probe. The sudden drop that left HSBC's stock down 24 percent Monday has shaken the former British territory, where the bank has deep roots and has been seen as a blue-chip investment by generations of retail buyers. “This bank is making money, and it's making money for shareholders,” Sandy Flockhart, chief executive officer of the lender's Asia Pacific operations, said at HSBC headquarters in Hong Kong. “We will come through this storm.” Monday's tumble came amid widespread jitters over HSBC's prospects after the lender, Europe's largest, announced last week plans to issue shares to shore up its capital position amid the global economic crisis. The stock fell 24.1 percent to $4.2 - its lowest close since 1995. The shares rebounded 13.9 percent to 37.6 Hong Kong dollars Tuesday. Hong Kong's Securities and Futures Commission said it was looking into transactions of the stock during the session's “closing auction,” a 10-minute post-trading period that was instituted last year. The stock went into a free-fall during the auction, the result of what market observers said were huge block trades that yanked prices lower in minutes. “The SFC is aware of the movement of HSBC share prices during the closing auction yesterday. We are now making inquiries,” said a SFC spokesman who declined to be identified, citing internal policy. Flockhart attributed the fall to “technical trades,” not “panic selling” ahead of the bank's plan to offer new shares this month. The recent travails of HSBC have transfixed this Asian financial capital, dominating newspaper headlines and touching off debate in the investment community over the pros and cons of subscribing to the bank's share offering. “HSBC is toppled. The whole city is mourning!” Hong Kong's Apple Daily, a mass market Chinese-language newspaper, said Tuesday. “I know many Hong Kong people are holding HSBC shares and they are very concerned about the ups and downs of the prices,” Tsang told reporters Tuesday. The bank, which trades in London and Hong Kong, has gone into a tailspin since announcing last week that it would raise $17.7 billion through a rights issue meant to shore up the company's capital position without resorting to government handouts. In Hong Kong, shareholders will be offered five new ordinary shares for every 12 existing shares at a price of $3.61 per new share. Shareholders must decide whether to participate in the offer by this week.
