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To: pezz who wrote (25432)	11/14/2002 11:11:51 PM
From: TobagoJack	Respond to of 74559

Hi Pezz, <<Shares of HSBC fell as much as 5.9 percent and were down 3.3 percent at 683.5 pence at 3:28 p.m. on the London Stock Exchange At first blush.....>> I am not terribly concerned, because HSBC is using paper to buy paper, though dividend paying paper for what could be toilet paper. I figure if the industry of the acquired company goes down in flames, then I will be much wealthier in gold, and if not, then in paper;0) This is what I mean by win-win:0) Chugs, Jay

To: pezz who wrote (25432)	11/14/2002 11:14:01 PM
From: energyplay	Respond to of 74559

A few comments on HSBC/HI - Many hedge funds were short HI, (and the other consumer lenders) and got burned good. Certain amount of sour grapes here. When there is an economic downturn, (like now) consumer lending companies see a better class of customer than the ones usually get - people who actually intend to pay their bills (and usually do) who have been pushed out of the economy temporarily. When the economy recovers, even moderately, HI gets paid back from these people at a higher rate than their usuall sub-prime customers, plus they may be able to sell these customers other products. Long term, like 2,3,4 years, this can be a good deal for HSBC. Short term it may have a certain amount of indigestion.

To: pezz who wrote (25432)	11/15/2002 5:47:37 PM
From: TobagoJack	Read Replies (5) \| Respond to of 74559

Good morninng Pezz, <<<<HSBC ... At first blush...>> But on second look, biz.scmp.com Saturday, November 16, 2002 Players welcome huge HSBC bid DAVID WILDER and AGENCIES Investors have responded mainly positively to HSBC Holdings' US$14.2 billion bid for United States consumer finance group Household International (HI). Broker upgrades saw HSBC strengthen in early London trade after a jittery Hong Kong market session had the counter falling HK$1 or 1.13 per cent to HK$86.75, against a 1.28 per cent jump in the broader market. The SAR sell-off was partly attributed to technical factors as arbitrage investors switched to Household International shares, anticipating completion of a share-settled transaction that made the US firm relatively more attractive. Bolstering market sentiment, Merrill Lynch switched its recommendation on HSBC stock to "neutral" from "sell" saying its initial reaction to the deal was one of surprise, and it maintained caveats that the purchase was a significant strategic diversion and a big call on the US credit cycle. It said the deal was opportunistic in that Household's share price had halved this year due to issues including accounting restatements, accusation of predatory lending tactics and restricted access to funding. These issues would be addressed by the presence of HSBC's management, capital and funding, Merrill said. JP Morgan was also fairly optimistic on the acquisition, upgrading the bank to "neutral" from "underweight". Even taking a pessimistic view it said Household would add about 9 per cent to group earnings next year. Return on investment should be in the high-teens even if consumer confidence and spending slipped further. DBS Vickers Securities sales director Michael Liang said technical factors lay behind yesterday's Hong Kong sell-off. "For hedge funds it's a typical arbitrage: you buy HI and sell HSBC - there's an arbitrage profit in there as it's an all-share deal." He said the perception that HSBC's bid might be on the low side left the door open for a counter-offer, a possibility that increased the relative attractiveness of HI shares. "Either way the deal will go through but it could be an even higher one taking into account that consideration, so naturally Household becomes the better bet." Associate director of institutional sales, South China Securities, Geoff Galbraith, said: "It was sold off too much because everyone thought they were buying a low quality mortgage lending business in the States, but the valuation is pretty cheap and it's EPS [earnings per share] enhancing." Plenty of doubters remained, with Deutsche Bank downgrading its rating on the British-based bank. "While the acquisition of Household International is earnings per share accretive, we believe it will raise HSBC's risk profile substantially, as 25 per cent of its loan portfolio will be in the US sub-prime lending market post the acquisition," Deutsche said in a research note. Others pointed to apparent empire building ambitions of HSBC chairman Sir John Bond. Charles Deptford, who helps oversee £2.5 billion (about HK$30.95 billion) at Rothschild Asset Management, including HSBC shares, said: "He wants to be everything. Household is a business which is more risky than anything they have done before." Then, again ... Message 18240305