A friend of mine is an HSBC (LSE: HSBA) shareholder, but I don’t know if he’s heard the latest news. I’m not going to tell him. The HSBC share price this week hit its lowest level since 1995. And it’s now down more than 50% so far in 2020, having dipped 6% since last Friday’s close.
The latest fall is down to allegations of money laundering, which are emerging from an investigation by the US Financial Crimes Enforcement Network (FinCEN). According to leaked documents, FinCEN has been examining around $2trn in transactions. It is suggested that some of the world’s largest banks have allowed criminals to move cash around the world without proper checks.
The probe has also fingered Barclays and Standard Chartered, and their shares have been hit along with the HSBC share price. And the fallout has extended to the banking sector as a whole, already under severe pressure from the economic slump triggered by the Covid-19 crisis.
Is HSBC a good company?
For investors, I think there are two big questions here. Firstly, is HSBC a good company for a long-term investment? Then, does the HSBC share price represent good value right now?
But first, a disclaimer. I might not be the best person to listen to when it comes to investing in banks. I own Lloyds shares, and Lloyds is in a worse slump in 2020 than HSBC. Then again, you shouldn’t base your investing decisions on the opinions of others anyway. I like to listen to what others think. But you should always do your own research and make your own decisions.
Saying that, yes I do think HSBC is a good company. “May you live in interesting times” is allegedly taken from a Chinese saying (though there’s no evidence for a Chinese source). It’s considered a curse, on the grounds that “interesting times” tend to be times of trouble. And right now, I think the times for HSBC are far too interesting. But I wonder if the HSBC share price already factors-in all of the ‘interest’.
HSBC share price pressures
It’s not just the latest allegations. HSBC is also caught up in the ongoing economic and political battle between Donald Trump and China. And critics have lambasted its apparent support for the new Hong Kong security law. That really catches the bank between a rock and a hard place. HSBC does significant business in the West, but it’s crucially dependent on its business in the Chinese sphere. All the signs are that HSBC will move closer to its Asian roots under new chief executive Noel Quinn.
So what about the HSBC share price, then? I think we could still see more rockiness over the next year or two. But hopefully the US-China war of words will die down following the US election, and I do believe 2021 could show brighter signs than this year.
And I think that, in another five years, we could be looking back on 2020 as a golden time to buy bank shares like HSBC. May you invest in interesting times!