HSBC Holdings plc ( HSBC ) announced the integration of PT Bank Ekonomi Raharja Tbk ('Bank Ekonomi') and its Indonesian branch. Bank Ekonomi is owned by HSBC's UK-based subsidiary - HSBC Asia Pacific Holdings (UK) Limited (HAPH).
Troubled by illiquidity of its shares in the Indonesian Stock Exchange, Bank Ekonomi was considering delisting from the exchange and transforming into a private company. Subsequently, it placed a request for suspending the trading of its shares from the next trading session.
Such delisting, however, is subjected to approval from the bank's independent shareholders. Consequently, HSBC has decided to integrate the business operations of Bank Ekonomi and its Indonesian branch, subject to regulations.
Post-integration, The Hongkong and Shanghai Banking Corp. Ltd., Indonesia (IMO) and PT HSBC Securities Indonesia (HCID) will comprise the HSBC Group in Indonesia.
Concerns over illiquidity have been haunting Bank Ekonomi for a while now. Notably, in May 2013, HSBC had considered selling its 98.94% stake in the bank due to such illiquidity issues, along with charges of market speculation.
Nevertheless, HSBC is focused on increasing its exposure in the emerging markets with growth potential and reaping benefits from the same. Also, a healthy capital position lends perfect support to its plans of strategic expansion.
Further, with half of its operations in the fast-growing emerging markets, we believe, the company is well-poised to beat its peers as and when these markets mature and outperform the developed economies in the long term.
However, until that happens, the company remains potentially challenged by a relatively higher inflation rate, wage pressure and prevalent volatility in the emerging markets.
Currently HSBC carries a Zacks Rank #3 (Hold). Some better-ranked foreign banks are Barclays PLC ( BCS ), CorpBanca ( BCA ) and Mitsubishi UFJ Financial Group, Inc. ( MTU ). All these stocks hold a Zacks Rank #2 (Buy).
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