The recent fall in the HSBC Holdings plc (HSBA.L)
share price is perhaps to be expected. The bank’s CEO resigned unexpectedly after less than two years in the job, which seems to have caused investor sentiment to come under pressure.
share price is perhaps to be expected. The bank’s CEO resigned unexpectedly after less than two years in the job, which seems to have caused investor sentiment to come under pressure.
In the short run, further volatility in the company’s shares would not surprise me. The bank faces
a period of management change at a time when the prospects for key market China and the rest of the world economy are uncertain.
The trade war between the US and China has ramped-up in 2019, and further tariffs could be ahead in my opinion. This could have a detrimental effect on the prospects for global banks such as HSBC.
That said, I feel that the company offers long-term growth potential. China, for instance, is expected to record strong GDP growth that leads to wage growth and rising wealth. Demand for banking services could therefore increase at a fast pace, which could act as a catalyst on the financial performance of HSBC.
Further, while its UK banking peers may be impacted by Brexit-related uncertainty, the bank’s relatively low exposure to the UK may mean that it is able to provide a degree of diversity within the FTSE 100 banking sector.
With a dividend yield of 6.7% following its share price fall, I believe the stock could offer income investing potential. Sure, there may be less volatile stocks in the FTSE 100 when it comes their income outlooks, but on a risk to reward basis I believe that HSBC could hold income investing appeal.
Therefore, while over the short term the stock may continue to lag the FTSE 100, I think that in the long run its valuation, income prospects and the growth potential across its key markets could lead to a rising share price.
By: Robert Stephens (Investomania).
Photo: Inside Financial Markets.
Review: FlagMarkets.