HSBC share price down 1.9% after attacks: where next for investors?

HSBC Holdings Public Limited Company (Hong Kong) saw its share price trade HK$0.50 lower to HK$60.40 per share the day after it was forced to shut down nine branches and ATMs across the city.

Last Thursday (02 January), two HSBC branches and seven ATMs were attacked by political protestors for having closed a bank account that was found to be linked to the activists themselves.

Rioters had vandalised the exterior of one of the bank’s branches in the Wan Chai district as well as a pair of iconic bronze lion statues that stand outside its Queen’s Road Central headquarters. They had also set several ATMs ablaze on New Year’s Day.

In November last year, HSBC had reportedly closed an account that belonged to an anti-government crowdsourcing group called Spark Alliance that was allegedly siphoning funds to protestors.

Then on 19 December, a few weeks after the incident, police arrested four Spark Alliance members on money laundering charges.

Protestors had accused HSBC of being in cahoots with the police for the December arrests through the closure of Spark Alliance’s bank account. At the time of closure, the account had purportedly accrued roughly HK$80 million in aid from protest sympathisers.

HSBC had denied any involvement to the arrests, stating that the account was closed weeks before due to compliance issues.

‘Our decision is completely unrelated to the Hong Kong Police’s arrest of the four individuals on 19 December 2019.

‘As the account has not been used for its stated purpose, we closed the account in November 2019 following fund transfer instruction from the customer,’ the bank said in a statement on 25 December.

This is the first time that HSBC has been targeted by protestors since demonstrations began last May.

Hong Kong share price down two percent

This round of attacks has dealt a blow to the financial institution, which generated more than 50% of its HK$12.5 billion pre-tax profits from Hong Kong in the first nine months of 2019.

Following the branch closures, the bank saw its share price dip HK$0.50 per share to HK$60.40 the next day on 03 January.

The weekend did little to soothe the nerves of fund managers. At 10am on Monday, 06 January, HSBC Holdings PLC saw its Hong Kong share price fall further to HK$59.90 per share, the lowest in nearly a month.

Share price is down nearly two percent since the attacks.

Since demonstrations against the Extradition Bill first started in June, HSBC’s share price has sunk nearly nine percent. Year-on-year, shares are trading 7.7% lower.

Comparatively, the Hang Seng Index – Hong Kong’s main stock market benchmark has recovered in the last two months to rally past June 2019 levels.

Outlook for fund managers and investors for the rest of 2020

With anti-government sentiment still high, analysts say companies like HSBC stand to lose more in the current delicate political climate.

‘Businesses now have to consider how three different groups will react to their decisions: The Chinese government, Hong Kong protesters, and Chinese consumers,’ said Kent Kedl, head of Control Risks Greater China practice.

But Louis Tse Ming-kwong, managing director of VC Asset Management, thinks these incidents will not have a lasting impact on HSBC’s financial performance this year.

‘For the last couple of years the contribution from Hong Kong is more than elsewhere within the group, but if the trade war gradually settles I think HSBC will have enough strength to cover their business within greater China as well as regional markets,” Tse told The Financial Times.

With more than 90% of its HK$4.4 billion retail banking and wealth management profits coming from Hong Kong alone, it remains to be seen how the group will fare in the coming months.

Group Chief Executive Noel Quinn, however, had stated in the bank’s less-than-stellar Q3 earnings release that he remained ‘confident’ of the bank’s future and the ‘resilience’ of its heritage markets, which include Hong Kong.

HSBC will announce its Q4 earnings for FY2019 on 18 February.

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