HSBC Plunges and Virus Woes
Fiona Cincotta September 21, 2020 8:38 AM
Second wave fears and a bomBshell banking report drag on FTSE
European bourses are starting the week on the back foot with the FTSE leading the charge lower. Rising covid cases, fears of tighter lockdown restrictions and a bombshell report on bank’s suspicious transactions.
Tighter lockdown restrictions coming
There is a distinct lack of good news as the FTSE kicks off trading for the week. New daily covid infections continue to rise sharply. With large pats of the UK seeing tighter lockdown restrictions and fears growing that London could be next. British Medical Advisor Chris Whitty is due to make a public briefing later this morning where warnings that the UK is at a critical point ahead of a very challenging winter are likely to keep sentiment depressed.
Bank’s can’t stay out of trouble
British banks are back in the spotlight for all the wrong reasons. A report that some of the world’s largest banks enabled flows of dirty money in suspicious transactions over a period of two decades, despite warnings from regulators is keeping the sector out of favour. HSBC was one of the 5 global banks which appeared heavily in the report, along with Standard Chartered, JP Morgan Chase & Co, Deutsche Bank and Bank of New York Mellon Corp.
HSBC at 25 year low
Heavyweight HSBC is a standout loser as the global bank faces trouble on several fronts as it is caught up in political turmoil and an economic slump. In fact, things couldn’t get much worse for the bank which is reeling under covid pressures and its increasingly difficult position in no-mans land, supported by neither the East or the West.
Not only is the suspicious transaction report extremely damaging, but the bank is on the brink of being added to China’s “unreliable entity” list, potentially threatening its plans to expend into China.
The so-called unreliable entity list looks to punish firms that damage national security. Should HSBC find itself on the list the bank will experiencing problems expanding into mainland China after investing heavily in directing the business that way over the past few years.
The stock is trading at a 25-year low and the outlook is troubling at best.
The economic calendar is light in Europe and the US. US tech stocks will remain in focus, with fears of the selloff continuing despite progress in the TikTok WeChat saga.
GAIN Capital UK Limited (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.
No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.