HSBC loyalists lose faith after stock's $114 billion plunge this year

HSBC's Hong Kong shares lost as much as 2.6 per cent as of 11:15 am on Sept 24.
HSBC's Hong Kong shares lost as much as 2.6 per cent as of 11:15 am on Sept 24.PHOTO: AFP

HONG KONG (BLOOMBERG) - HSBC Holdings' tumbling stock price is testing the patience of even the bank's most loyal investors.

Choi Chen Po-sum, a former vice chair of Hong Kong's exchange who has owned HSBC shares for more than 40 years, now calls her investment a mistake. Simon Yuen, a money manager who has lobbied unsuccessfully for the bank to reinstate its dividend, says the stock's slump to a 25-year low may have further to go. Ping An Insurance Group, HSBC's biggest shareholder, has passed on opportunities to express confidence in the bank, saying only that its holding is a "long-term financial investment."

The responses underscore the depth of investor malaise toward HSBC, which has tumbled faster than every other major financial stock globally over the past six months. Even historically upbeat sell-side analysts have mostly turned bearish on the bank amid growing concerns about loan losses and its ability to navigate mounting tensions between the US and China.

"I've lost faith," said Mr Choi, 89, who's chair of National Resources Securities in Hong Kong, where scores of individual investors have long considered HSBC to be a core holding. "You want the shares to recover? Don't even think about it."

HSBC's Hong Kong shares lost as much as 2.6 per cent as of 11:15 am on Thursday. The stock has tumbled more than 9 per cent so far this week, bringing the year's decline to 54 per cent and making it the worst performer in the benchmark Hang Seng Index. In London, the shares have fallen about 51 per cent. After losing US$83 billion (S$114 billion) of market value this year, HSBC is now smaller than Commonwealth Bank of Australia and trailing far behind major rivals such as Citigroup.

Analysts have never been so downbeat on HSBC, with only 16.7 per cent of 30 who follow the stock having a buy recommendation whereas just two years ago the ratio was 47 per cent. Even after its slump, the bank is valued at 16.3 times forecast earnings for 2020, a pricier level than some peers. Both Citigroup and smaller rival Standard Chartered Plc trade at multiples of about 13.

Ping An, which has owned a major stake in HSBC since late 2017, has seen the value of those shares tumble by at least US$8.6 billion over the past three years, according to data compiled by Bloomberg.

The depth of HSBC's slump "means even long-term investors are starting to lose confidence in the stock, which is certainly a bad sign," said Benny Lee, a director at Plotio Financial Group Ltd.

HSBC declined to comment on its share performance.

The growing disillusion in Hong Kong with the bank's prospects comes after it earlier this year was among banks forced by UK regulators to scrap its dividend, causing an uproar with the city's broad base of retail investors. It has also rankled China over its participation in the American investigation of Huawei Technologies Co.

Concerns are mounting that the bank's expansion in China will be derailed after the ruling Communist Party's Global Times newspaper reported over the weekend that HSBC could be named an "unreliable entity." Penalties for companies that appear on the list include restrictions on trade, investments and visas. HSBC has declined to comment on the article.

 
 
 

"Should it be on the list, even without tough measures taken, its mainland China business would likely be adversely impacted as its clients reduce transactions," Citigroup analysts led by Yafei Tian wrote in a note on Tuesday. "Mainland China clients in HK might also avoid unnecessary transactions with HSBC HK. In a worst case scenario, HSBC might be forced to divest its investments in mainland China."

HSBC chief executive officer Noel Quinn last month warned about tough times ahead while reporting that first-half profit halved and predicting loan losses could swell to US$13 billion this year. Mr Quinn said the bank would attempt to hasten a shakeup of its global operations, accelerating a further pivot into Asia as its European operations lose money.

Some investors aren't convinced it's enough.

"The share price will hardly recover in the near term and there's still room for a further decline," said Yuen, founder of Surich Asset Management. "Hong Kong investors' love for HSBC is still there, but it's indeed heartbreaking. The times have changed."