“Rights issue fatigue” drove London’s markets lower this week as investors digested the news that HSBC and Wolseley, the building supplies group, are poised to join the list of companies looking to spruce up their balance sheets through emergency cash calls.

HSBC’s announcement of a £12.5bn rights issue – the UK’s largest to date – came on Monday as the bank revealed a 62 per cent fall in pre-tax profits to £6.5bn and a dividend cut of 29 per cent. Shareholders taking part will receive five shares for every 12 held at a price of 254p, a discount of 29 per cent to yesterday’s closing price of 358p.

Wolseley’s £1bn capital raising is more complicated. It is turning 10 shares into one and offering 11 new shares for every five consolidated shares to all investors, including those who bought shares in the placing. This will raise £780m. The price has been set at 400p, the equivalent to 40p a share, pre-capital reorganisation. It has also placed 225m of new shares with its existing investors at 120p to raise £270m.

With the debt markets off-limits, the list of companies looking to tap investors for capital grows longer by the week and has widened beyond the UK banking sector. HSBC’s announcement follows a £4.1bn rights issue from the mining group Xstrata. Premier Foods, Hammerson, Land Securities and Segro, and Lloyd’s syndicates Catlin and Beazley are also among the clutch of companies to stage cash calls in recent months.

Across Europe, non-financial companies are expected to raise £267.5bn this year, the highest level since 2001.

Companies resort to rights issues for several reasons. Heavily-indebted ones use them to deleverage operations, especially when borrowing is no longer an option. For healthier companies, they are a cheap way to fund capital improvements and acquisitions.

Nick Kirrage and Kevin Murphy, managers of Schroders Recovery fund, encourage investors to take part in cash calls that will see a business through the bad times and not be required again in the near-term.

“If a company has £1bn in debt and raises £200m to lower its debt level to £800m, is that transformational? I’m not so sure,” says Chris White, an equity fund manager with Threadneedle who shares their view.

At the moment, the concern is that the markets do not have enough capacity to absorb the tens of billions of pounds in equity issuance that UK companies are looking to write.

With the exception of HSBC’s offer, shareholders are being urged to reject calls to participate in most of the current rights issues because of rocky market conditions and poor terms. “In my view, HSBC is a weak hold right now and the others don’t have much merit,” claims Richard Hunter, head of UK equities at Hargreaves Lansdown. “The question you have to ask is whether you would go out and buy £1,000 worth of HSBC’s or any of these other companies’ shares.”

Though analysts tend to dismiss the wider round of rights issues, a number are quite bullish on HSBC’s prospects – in spite of the group’s problems integrating Household, the US consumer lender, and its move to cut its dividend to $0.64 per share.

“HSBC is in a good position, compared with others in the banking sector; it made £6.5bn in profits and the extra cash will be used to boost the balance sheet,” says Nick Raynor, investment adviser at The Share Centre, the UK stockbroker. “We are advising investors who can afford to take up the rights issue to do so. The City has fully underwritten and supported it, so investors should be confident in joining them.”

After the rights issue, HSBC’s core equity tier one ratio – the capital cushion all banks are required to hold – will reach 8.5 per cent, putting the bank in a stronger position to acquire less stable rivals hit by the downturn.

The options for shareholders in companies undertaking rights issues are limited. They can either buy shares, sell their option to buy the rights in the market, or let their shares lapse.

Investors who choose not to take up their rights usually see their holdings diluted substantially. And even if shareholders can sell their rights to other investors, they can fail to get a fair price. As a result, there are calls to introduce an online brokerage system to increase the profits that private investors see from rights issues.

The Financial Services Authority has also made a proposal to cut the time it takes for companies to raise capital through rights issues. The minimum time in which shareholders have to decide whether to buy new shares or sell their rights, should be cut from 21 to 14 days, it says.