Trade HSBC Stock
HSBC Holdings PLC is a British banking and financial services holding company that operates globally, serving more than 54 million customers worldwide in 64 countries and territories. As of 2020, the company is the world’s 6th largest bank and the largest within Europe. It holds assets totalling almost $2,918 bln.
The story of HSBC began in Hong Kong, where branches were opened in Shanghai and Hong Kong in March 1865, marking the first locally owned and managed bank. HSBC Holdings, which is also based in London today, was set up by the Hong Kong and Shanghai Banking Corporation in 1991 as a group holding company.
Interestingly, the name ‘HSBC’ is derived from the initials of the Hong Kong and Shanghai Banking Corporation, the founding member of HSBC. The company’s red and white hexagon symbol was inspired by the bank’s original house flag, which was in turn based on the cross of St Andrew and the two lions that appear in the symbol have been nicknamed Stephen and Stitt after senior managers that worked in the company during the 1920s.
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The inspiration behind the establishment of HSBC was a Scotsman named Sir Thomas Sutherland who, at the time, worked for the Peninsular and Oriental Steam Navigation Company in Asia.
Sutherland quickly realized that there was incredible untapped potential for banking operations on the Chinese coast and in Hong Kong. He helped to set up the bank, which opened its doors to its first customers in March 1865, followed by a second location in Shanghai barely a month later.
Immediately after the bank commenced its operations, it started opening more branches in order to provide its services to more customers. Although HSBC’s global bank branch network was extensive, stretching as far as North America and Europe, the organization placed its major focus on serving the Asia-Pacific region in general, and China in particular.
The bank pioneered many of the modern banking practices enjoyed today: for example, it was the first bank set up in Thailand and it also printed the country’s first currency notes.
Right from the start, trade finance was a major focus of HSBC’s local and international operations, and the bank has been recognized through the years for its expertise in this particular area.
In addition, the bank became known for forex, bullion, note issuance and merchant banking. In 1874, the company made history by issuing the first public loan in China, and has, since then, issued most of the public loans in China.
Early in the 20th century, the bank started to widen the scope of its business in the East. HSBC began to issue loans to Asian governments, particularly that of China. The funds were used to modernize the countries and to set up a variety of infrastructure projects, such as the building of railways.
During the Second World War, many of HSBC’s staff in the East were prisoners of war, with the advance of the enemy through its areas of operation. Still, the bank managed to survive, thanks to the stewardship of Arthur Morse and his prudent policy of growing large reserves during peacetime.
In other markets, the bank started to diversify and grow through a series of acquisitions and alliances. Notably, the bank’s acquisition of the British Bank of the Middle East and Mercantile Bank, was a move that took HSBC into new territory, while it extended its range of services by setting up a merchant banking division in 1972.
This set up the company to move from a large regional financial institution into one of the leading financial services providers in the world, by the close of the 20th century.
Into the second decade of the 21st century, HSBC not only consolidated its place as one of the biggest names in the financial services sector but renewed its focus on its origins by fostering a series of strategic and organic partnerships in China.
The bank’s diversification, combined with its stability, has enabled it to withstand turmoil within the financial markets and global economies.
In April 2000, HSBC expanded into Continental Europe by acquiring French bank Crédit Commercial de France, for £6.6bn. A year later, in July, HSBC bought Demirbank, an insolvent Turkish bank, and in August 2002, the company acquired Mexico’s third-largest retail bank, Grupo Financiero Bital, SA de CV, for $1.1bn.
Under the leadership of Sir John Bond, HSBC expanded further into the U.S. in 2002 and they acquired Household Finance Corporation (HFC), a US credit card issuer and subprime lender, for £9 billion. Under the new name of HSBC Finance, this division was the second-largest subprime lender in the US.
In April 2003, HSBC Holdings moved to their new headquarters at 8 Canada Square, London. In September of that same year, the company bought Polski Kredyt Bank SA of Poland for $7.8m. Only one year later, HSBC expanded into China by buying 19.9% of the Bank of Communications of Shanghai.
In addition, in the UK, HSBC acquired Marks & Spencer Retail Financial Services Holdings Ltd for £763m in December 2004. Between 2005 and 2008, other notable acquisitions included Metris Inc, a US credit card issuer for $1.6bn; Dar es Salaam Investment Bank of Iraq; 90 branches of Banca Nazionale del Lavoro in Argentina and IL&FS Investment, an Indian retail broking firm.
During the global financial crisis of 2008, HSBC weathered the financial storm better than most other global banks. To put it into perspective, when HM Treasury required all UK banks to increase their capital in October 2007, the group transferred £750 million to London within hours and announced that it had just lent £4 billion to other UK banks.
By March 2009, HSBC announced that it had made US$9.3bn of profit in 2008. At the same time, they announced a £12.5bn rights issue which enabled the company to buy other banks that were struggling to survive.
Interestingly, the uncertainty over the rights’ issue’s implications for institutional investors caused volatility in the Hong Kong stock market. As a result, on the March 9th 2009, HSBC’s share price fell 24.14%, with 12 million shares sold in the last few seconds of trading.
In February 2015, things got a bit rocky for HSBC. At the time, the International Consortium of Investigative Journalists (ICIJ) released information about the business conduct of HSBC under the title “Swiss Leaks” based on the 2007 hacked HSBC account records from whistleblower Hervé Falciani.
The ICIJ alleged that HSBC had profited from doing business with corrupt politicians, dictators, tax evaders, arms dealers, dealers of blood diamonds, and other clients. A few months later, HSBC sold its Brazilian unit to Banco Bradesco for $5.2 billion stating disappointing performance.
In March 2017, uncovered by an investigation named Global Laundromat, The Guardian newspaper reported that hundreds of banks had helped launder KGB-related funds out of Russia. HSBC was listed among the 17 banks based in the UK, including the Royal Bank of Scotland, Lloyds and Barclays. HSBC denied all charges and stated that it was against financial crime. In October 2017, Mark Tucker succeeded Douglas Flint as the Group Chairman of HSBC.
HSBC Stock History
HSBC is a popular stock with investors, with the bank boasting over 200,000 shareholders spread across more than 125 countries. The company has a dual primary share listing on the London Stock Exchange in the UK (trading under the HSBA ticker) and the Hong Kong Stock Exchange (trading under the HKG ticker: 0005).
It is also a constituent of the Hang Seng Index and the FTSE 100 Index. It also has secondary listings on other exchanges, most notably in Bermuda, the New York Stock Exchange (NYSE), and the Euronext in Paris. HSBC trades under the Banking, Financial services sector.
HSBC’s financial year runs parallel to the calendar year, up to and including the 31st of December. The bank’s annual results are normally announced in late February or the early part of March the following year. HSBC also publishes its interim results at the end of July or in early August. There are also quarterly updates that are announced after the first and third quarters.
The bank’s policy is to pay out dividends in three equal instalments, and a fourth variable dividend. The pound sterling value of the HSBC dividends is variable and is heavily dependent on the movements in the forex market.
In fact, even the cash exchange rate and the scrips rate (the right to elect to receive new Ordinary Shares instead of a cash dividend) for the same dividend payment may be different; since they are set up on different days, it is impossible to know what the cash exchange rate is until the scrip deadline has passed.
On the September 27th, 2018, HSBC paid out dividends of £0.076320 per share. HSBC shares were trading at a high of 791 GBP a share and the market cap was at $167.46B. However, 2020 as was the case for most banking stocks, was not kind on HSBC as the price slumped down to $337 in November 2020.
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How to Trade HSBC Stock?
With its focus on Asia, and specifically China, HSBC is a global banking giant with a number of unique characteristics that affect its stock price and make it an excellent option for medium to short-term traders. Some of these include:
- Legislative and Legal Charges
In 2012, the top brass at HSBC were forced to appear before the U.S. Senate Permanent Subcommittee on Investigations (PSI). The hearings were the result of an investigation carried out by PSI with regard to claims that HSBC’s compliance with financial regulations associated with anti-money laundering was inadequate, thus putting the U.S. financial system in jeopardy. The U.S. government then held the bank responsible for more than $2.6 billion in laundered money and assets acquired by drug lords. On December 11th 2012, HSBC agreed to pay a record $1.92 billion fine in this money laundering case. This type of negative publicity is never positive for a company’s share price or for investor confidence.
- Competitor Analysis
As of 2018, on the Greenwich Associates list of share leaders within Asian corporate banking, HSBC leads the way, followed by a tie between Citi and Standard Chartered and in fourth place, is another tie between DBS Bank and ANZ Bank. When it comes to large corporate cash management, the situation is similar, with Citi and HSBC locked in a tie at first place, with their market penetration at 32%. Standard Chartered is second with 22%, while the Bank of China comes third at 17%. With Asian economies relatively strong and some even experiencing massive growth, HSBC is well-positioned to take advantage, something that definitely could ramp up its share price.
- Impact of Brexit
HSBC took the decision to move ownership of the bank’s Irish and Polish subsidiaries from HSBC UK to its unit in France. It planned to do the same with seven more branches across Europe, in preparation for Britain’s move away from the EU, since British-based businesses will lose passporting rights, which let them sell their financial services within the European Union.As with many other businesses, HSBC has been affected by the Brexit vote, but not as profoundly as many of its competitors. For instance, from January 2017 – October 2018, shares of RBS have dropped by a massive 96%, Lloyds has shed 84% and Barclays lost 57%. However, with its massive interests outside the EU, HSBC has managed to lose only 12%. When dividends are factored in, HSBC shareholders are actually ahead.
- Impact of Covid-19
Coronavirus may have boosted tech stocks, but it wasn’t so kind to stocks in the financial space. HSBC, in particular, was hit hard in Q1 of 2020, as it reported a drop of 48% profit. This came as a result of credit losses from companies that had defaulted, lower revenue and credit impairment charges.
It is vital to monitor all these factors in short-to-medium-term stock trading, and in this way, you are able to get a better understanding of what will impact the share price of HSBC.
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HSBC Stock FAQ
- Why should I trade HSBC shares?
HSBC is a multi-national financial services, investment, and banking company, with headquarters in London, Hong Kong, Paris, and New York. Its operations span the globe and it services over 40 million customers. The stock is dual listed on both the London Stock Exchange and the Hong Kong Stock Exchange. As one of the largest banks in the world HSBC shares are traded in the millions each day, and as a trader you should be interested in taking part in that liquidity. Trading in financial services companies could become quite interesting in the coming years, thanks to the zero interest rate policies and massive stimulus measures from global central banks.
- Is HSBC the best financial services stock for trading?
There are many different financial services stocks, and at any given time any of them can be the best. Because it has deep, strong ties to Asia, HSBC could well be the best bank stock to trade in response to events in Asia. That said, HSBC also has a global presence, and that can also have an influence on the stock. For several years leading up to 2020 shares were in a distinct downtrend, but have been rising following the massive drop in stock markets that occurred in March 2020. Until markets are able to stabilize and trade in a more normal fashion it’s very hard to determine where stocks should actually be trading.
- What’s the best strategy for trading HSBC shares?
As of late 2020 HSBC shares are in a strong uptrend and it’s difficult to think about not going along with that momentum. As long as the uptrend is continuing in this fashion, we believe it’s a good trade to use momentum strategies. If the stock goes back to its prior price action then a support and resistance strategy is preferred as the stock has been known to remain in a fairly well-defined channel as it trades. This allows for buying at the lower boundary of the channel and selling at the upper boundary of the channel.