HSBC’s worrisome 2020 share performance

HSBC has been a safe investment for decades. 

The 155-year old bank gained from bridging the divide between the East and the West and paid its investors a steady and healthy dividend. The bank shares are traditionally used as a gift for graduations, anniversaries and birthdays. 

However, recently HSBC has been in troubled waters and is struggling to keep afloat. It announced that it would suspend final dividend for 2019 and payouts. 

HSBC was lambasted by the UK and US for supporting HK’s controversial National Security Law. Additionally, it faced heavy criticism from the Chinese Mainland media for supporting investigations into Huawei Technologies, putting their business in the region at risk. To add fuel to the fire, leaked papers of HSBC’s dubious dealings have surfaced which show the bank helped corporations launder money from US to HK accounts. 

 Pressure from multiple fronts caused HSBC’s shares to dip to its lowest numbers since 1995 in late-September . The bank has been outperformed by its global competitors. Standard Chartered, which also suspended dividend payouts, shares dipped by 14% as opposed to HSBC’s 29% decline since April 1st. 

HSBC’s free falling share prices and underperformance make it a risky investment. 

Unwavered by HSBC’s uncertain future, Ping Ann Insurance backed the UK-based bank with a US$39.4 million stock purchase. The Shenzen based insurance company has steadily invested in HSBC since 2017.  Ping Ann purchased 10.8 million shares increasing its stake to 8% from 7.95%. HSBC’s recent slump has made it an even more appealing investment to the Shenzen based insurer. It considers HSBC as a long-term investment and is optimistic that HSBC’s suspension of dividend payouts is temporary and would be lifted soon. 

Ping Ann’s backing comes as a blessing in adverse times for HSBC. 

The bank’s stock rose by nearly 11% on the Hong Kong Stock exchange on 28th September’s afternoon session. This marked the bank’s biggest intraday jump in share prices since 2009, ending the 25-year low. 

The share price jump comes as good news, but that does not mean all is well. HSBC is caught between the standoff of worsening US-China relations, embroiled in money laundering allegations and is yet to recover from 2020’s underwhelming performance. Its future as the trusted bank that we have known may not be as secure anymore.