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HSBC stock on edge as China ramps up stimulus measures

Writer's picture: Chris Chris

HSBC Bank
HSBC Bank

HSBC (HSBC) is one of the biggest banks globally, with over $3 trillion in assets, and a market cap of over $161 billion. It is the biggest European bank based on assets and valuation. 


HSBC’s business is divided into three key areas: wealth and personal banking, commercial banking, and global banking and markets. The first division accounts for about 41% of its total revenue.


HSBC’s business is at the intersection of Europe and Asia. While it is a UK company, it generates most of its revenues and profits from Asia, especially in China. 


Most recently, the company has gone through major changes, which have seen it exit some of its least profitable markets like Argentina, France, Canada, the United States, and South Africa. The management hopes that this exit will help to make it a more profitable company in the long term.


HSBC stock is primarily listed in London, with other shares traded in the United States and Hong Kong. Its US shares were trading at $44.35, up by 20% this year. 


HSBC HypeIndex
HSBC stock

Positive hype


  • HSBC will be a top beneficiary for the recently announced stimulus package in China. Beijing announced more stimulus measures on Monday, leading to hopes that the economic recovery will continue.


  • HSBC is highly exposed to the Chinese and Hong Kong markets, where it provides wealth management and personal, and commercial banking solutions. 


  • More stimulus, especially in the real estate sector, could help it reduce the volume of non-performing loans (NLP) in the country.


  • HSBC is becoming a major player in the fast-growing wealth management business, which brought in over $84 billion in assets in 2023. It hopes to compete directly with UBS, the biggest wealth manager in the world.


  • The company recently introduced a new Chief Executive Officer (CEO), Georges Elhedery, who has promised to continue with changes to the company as part of the cost-cutting measures. 


  • One of the proposed measures is to merge divisions and eliminate managerial positions. These cuts will mirror those made by Citigroup, the giant American company that aimed to become a global financial supermarket. 


  • HSBC published strong half-year financial results, which showed that its revenue rose by 1% to $37.3 billion. Its profit before tax rose to $21.6 billion while its return on tangible equity jumped to 21.4%. 


  • The company is also boosting its shareholder returns after increasing its share buybacks. It completed a $5 billion buyback in the first half of the year, bringing the total returns since 2022 to $12 billion. It then announced a further $4.8 billion increase in distributions.


  • HSBC has a CET1 ratio of 15.0%, one of the highest in the industry. This means that it has room to grow its dividends and buybacks in the future since most European banks have reduced their ratios to 13%.


  • HSBC also has one of the highest dividend yields in the banking sector, with a 7% return.


Negative hype


  • The bank’s net interest income could be affected by the ongoing interest rate cycle by top central banks. 


  • Zing, its recently launched money transfer application, is not growing as expected as it is competing with other well-known brands like Wise and WorldRemit.


  • HSBC still has some substantial exposure in the Chinese real estate industry, which is facing substantial defaults.


HSBC stock summary


HSBC stock price chart
HSBC stock price

HSBC stock has done well in the past few years, helped by the continued actions by the management, including exiting its least profitable markets. It has soared from a low of $14.28 in 2020 to almost $50 today. 


The stock has formed an inverse head and shoulders pattern, a popular bullish sign. It remains above the 50-day and 100-day Exponential Moving Averages (EMA). 


Therefore, HSBC shares will likely continue rising ahead of its quarterly earnings update scheduled on October 29. A move above the year-to-date high of $46 will point to more gains.


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HypeIndex is an AI platform that detects Hype in stocks and cryptos before it moves the market, providing reliable early detection for profitable investment opportunities.

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