by Parvathy Ullatil & Wee Sui-Lee

FACED with a multi-billion-dollar cash call, HSBC investors are torn between the bank's relative strength and the headwinds still ravaging global financial firms.

HSBC, dubbed the "big elephant" in Hong Kong because of its mammoth market capitalisation and powerful share-market performance, has shed US$37 billion ($57.4 billion) in market value since last Monday, when it outlined plans to raise US$17.7 billion in a deeply-discounted rights issue.

Yesterday, the bank's Hong Kong-listed shares plunged 24 per cent as large investors shorted the stock on hopes of buying it back after the rights issue.

While the rights issue will enhance the bank's capital ratio by 150 basis points and raise its Tier 1 ratio to 9.8 per cent - restoring its capital advantage over most rivals - further writedowns in the bank's United States and Europe businesses have made investors wary.

Despite the selldown, the stock is still seen as expensive for some, with its estimated price this year to book ratio at 0.8 times, compared with 0.6 times for Standard Chartered, another Britain-based lender with a focus on emerging markets.

Said fund manager Winson Fong: 'With no improvement in the news and data we have been getting, the outlook on the US is an important determinant for an HSBC buy or sell.'

After making a loss of US$16.5 billion on its US business last year, compared with US$1.1 billion a year ago, HSBC said it would shut most of its US consumer-lending business.

But worries persist over its US$62 billion in outstanding loans at its HSBC Finance arm in the US and rising provisions in its business in Britain.

The bank is expected to slash its dividend this year by half. But HSBC, unlike many other global lenders, turned a profit last year and some company watchers said its soon-to-be-bolstered balance sheet will equip the bank to acquire new businesses as competitors pull back.

The bank's focus on more resilient emerging markets, including China, and a strong influx of deposits stands it in good stead, said analysts.