HSBC shares caught in a per­fect storm

The Daily Telegraph - Business - - Business - louis ash­worth mar­ket re­port

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.

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