HSBC shares caught in a perfect storm
SHARES in HSBC plunged as the lender found itself caught in a perfect storm of geopolitical pressures, negative news flows and broader lockdown fears. The lender’s shares fell beneath their financial crisis nadir in Hong Kong and London to hit their lowest levels in around a quarter of a century, closing down 16p at 288p on the LSE.
The weekend delivered a one-two news punch to the bank’s shares. Firstly, on Saturday, Chinese state paper the Global Times reported HSBC was a possible candidate for China’s “unreliable entity list”, which could leave it open to sanctions.
Then, on Sunday, it was among the lenders named in an investigation by the International Consortium of Investigative Journalists, which alleged HSBC was among international lenders reporting suspicious flows of money through its accounts to US authorities in 2013 and 2014. In response to the ICIJ report, HSBC said it is now “a much safer institution”.
The latest twists add to pressure on recently appointed chief executive Noel Quinn, who is already attempting to conduct a shake-up of HSBC’s global operations. Royal Bank of Canada’s
Benjamin Toms said the ICIJ investigation had created a new “overhang” for the banking sector – one that could prompt further regulatory pressure and fines for lenders. Investors took the news badly, with British banks selling off hard at the start of the session. Quickly, however, they were swept up in a wider sell-off hitting the real estate and transport sectors with particular force.
Nearly all of London’s blue-chip stocks lost ground, with British Airways owner IAG diving 13.4p to 97.2p and engineers Rolls-Royce and Melrose down 19.5p to 160.7p and dropping 10.6p to 109.4p respectively. The trio are particularly exposed to further turmoil in the aviation sector.
Supermarkets were the sole bright spot: Tesco gaining 5.9p to 225.5p and Morrisons up 4p to 178.2p on expectations that new lockdown measures will once again boost buying. It was a similar story across the wider market, where movements echoed the themes seen earlier this year: pub chains and transport firms endured a bloody session, with double-digit percentage drops across a string of companies as most of London’s mid-caps lost ground.
Again, however, there were a handful of thematic bright spots: Royal Mail, up 3.8p to 240.5p, and Domino’s Pizza, up 3.6p to 345.4p, rose on expectations that locked-down Britons might once again turn to online shopping and takeout food.
It was a similar story on currency and commodity markets.
Brent crude fell almost 5pc as fears of a second demand crunch rose, while the dollar strengthened against major peers as investors looked to grab lower-risk assets.