How low is low for HSBC?

Ben Kwok August 05, 2020 09:15

Here is a million-dollar question: could HSBC Holdings rebound like it had in the financial tsunami in the last decade?

The odds seem bad. Shares of HSBC fell to a 12-year low after it reported a lower-than-expected interim result with higher provisions and no dividend in sight.

HSBC is ranked one of the worst performers in the blue-chip index, having fallen 44 per cent year-to-date.

The elephant that serves more than half of the city’s population owes much to Hong Kong loyal shareholders, with many of whom religiously buying up the counter for dividend yield.

Unfortunately, all these end this year as the banking giant suspended dividend payment for its shareholders given the onset of global epidemic.

Worse still, the bank was torn between two lovers as it failed to please neither the US (because of its support to the national security law) nor Chinese government (because of the Huawei incident).

Apparently, HSBC has lost its appeal to investors. Many brokerages turned its back to HSBC with a downgrade to its target price.

Things can be worse for the rest of the year. The bank said it will continue to face a wide range of potential economic outcomes for the second half of 2020 and into 2021, partly dependent on the extent of any potential impacts from new waves of Covid-19, the path to the development of a possible vaccine and market and consumer confidence levels.

That will be on top of a heightened geopolitical risk in Hong Kong and the UK, lower global interest rates and reduced customer activity.

After an absolute domination for decades, HSBC’s market capitalisation of around HK$700 billion is way behind China Construction Bank, not to mention tech behemoths such as the Alibaba Group and Tencent Holdings.

If this falling trend continues, it would not be too long before the counter gets kicked out from the top 10 in Hong Kong.

We know the day will come, but not sure when.

Do not catch a falling knife.

-- Contact us at [email protected]

Ben Kwok

EJ Insight writer

Hong Kong

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