HSBC Lawsuit Drags HK Banking Shares Lower


In Asia Monday Hong Kong's Hang Seng Index fell 1.2% to 23,469 and China's Shanghai Composite Index slid 0.5% to 2,955. In Japan the Nikkei 225 Index remained virtually unchanged at 9,498.

In Hong Kong, HSBC sank 2.5% after news broke that five Taiwanese lenders are suing the Hong Kong-based global bank over its involvement with a Ponzi scheme that reportedly cost them over $500 million. The banks, including Hua Nan, Cosmos Bank and Bank SinoPac, were targeted by Danny Pang's PEMGroup, which claimed it was investing in timeshare properties and life insurance policies for the elderly. In reality, Danny Pang (pictured), the scheme's engineer who committed suicide in 2009, was skimming off cash to pay for luxuries like a Gulfstream jet and an Aston Martin. According to the Wall Street Journal, Pang also used the money to finance his Las Vegas gambling habit. Meanwhile, he paid out investors with cash from fresh investors. HSBC USA is accused of lying to investors about PEMGroup's track record and the length of time it had been servicing its investments, according to Bloomberg.

Other Hong Kong banking shares also fell, with Bank of Communications, which is partly owned by HSBC, losing 1.2%, China Construction Bank sliding 1.9% and Bank of China slipping 1.1%.

Hong Kong property companies took a hit today after Hong Kong's monetary authority executive said that Hong Kong's housing bubble is now the biggest threat to financial stability in Asia, reports Bloomberg. This weekend sales of used homes soared, despite the government's efforts to curb prices, including abolishing offering residency to foreigners who buy homes there. Today Sun Hung Kai tumbled 1.8%, Cheung Kong slumped 1.6% and China Overseas declined 1.2%.

In China, Zijin Mining plummeted 7.8%. The company now faces lawsuits stemming from an accident at a tin mine where four people died when a dam collapsed. The company has also been fined for another accident that contaminated a fishing lake. Shandong Gold Mining and Zhongjin Gold Corp both lost 9% after the price of gold fell, while Yanzhou Coal Mining tumbled 6.1%.

In Japan Mazda lost 0.9% after reports that Ford may sell shares in the carmaker. Isuzu fell 2.5%, Nissan was down 0.8%, Toyota gained 1.2%, Fuji Heavy Industries, the maker of Subaru car,s added 1.1% and Honda advanced 1%.

Utility companies led the Nikkei higher today as investors bargain shopped. Kansai Electric Power climbed 3.1%, Tokyo Gas gained 2.5% and Tokyo Electric rose 1.3%.