HSBC provides bounce as FTSE hits new highs - London Report

THE FTSE rose to another record high yesterday as reports suggesting HSBC will spin off its British retail bank in a £20bn ($30bn) deal boosted stocks.

The banking giant was up 3.1 per cent and has already said it is reviewing whether to keep its headquarters in London, given increased regulation and the possibility of a referendum on Britain’s membership in the European Union - a pivotal issue in the 7 May General Election.

“HSBC investors are warming to reports that the UK-domiciled and London-listed bank is mulling a spin-off of its UK retail banking operations to ensure it remains flexible to any changes to the UK's membership in the EU,” Will Hedden, a dealer at London Capital Group, said in a note.

Standard Chartered rose 4.3 per cent.

The rise in HSBC added nearly 15 points to the FTSE 100, which was up 33.28 points, or 0.5 per cent, at 7,103.98 points by the close. The index surged to a record 7,122.74 points, surpassing a previous high set earlier in the month. The increase came despite increasingly volatility ahead of next week’s General Election, with proposed Labour policies announced at the weekend hitting housebuilders.

The Labour Party said on Sunday it would introduce rent controls if it won the election and ban private landlords from raising rents by more than the rate of inflation for the duration of new three-year contracts.

Traders said the proposals could weigh on the housing market, which in turn was contributing to the drop in housebuilder stocks, even though the party also said it would scrap stamp duty for first-time buyers.

Illustrating investor concerns around the election, housebuilders such as Taylor Wimpey and Barratt Development both underperformed.

The FTSE also fell away towards the close after a poll put the Conservatives six points ahead of Labour party, sending sterling to a seven-week high. Markets historically tend to favour centre-right-leaning Conservative governments, although a rally in sterling makes the pound-denominated FTSE worth nominally less.

The FTSE underperformed European shares, which were buoyed by hopes that a new negotiating team would help Greece reach a deal with lenders.

“We've been bouncing around 7,000-7,100 for two weeks, but a strong finish today above 7,100, helped by the Eurozone, would leave us set for a break out,” said IG’s Chris Beauchamp.

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