FTSE 100 banking and financial corporation HSBC (LSE: HSBA) is on a roll today. As I write, the HSBC share price up 7% from yesterday, after posting its earnings release. The economic downturn has taken a toll on its performance in the recent past, and continues to do so now. The difference is that a silver lining is now visible behind the weakness in both revenues and earnings.
HSBC share price is rising fast
According to a Bloomberg report, earnings fell less than forecast, which is a positive for the HSBC share price. But there’s more. It has also reduced the amount of expected credit losses as the economic outlook is more stable now.
Importantly, it’s mulling over resuming dividend payments again. The Bank of England had advised financial services institutions to pause dividend payouts earlier this year as the lockdown started. It hasn’t yet green-lighted them, but it’s expected to declare its verdict on the matter before 2020 ends. Based on this, and its expectations for the economy, HSBC will spell out its revised policy in February next year.
The downside
While this looks like a whole lot of positive news, bumping up the HSBC share price, I think in the cold hard light of day, it’s evident that the bank has a number of risks to contend with too. The US-China trade war, Brexit uncertainty, and Hong Kong protests are just some of the examples of geo-politics at play. There’s a global economic slowdown in the mix now too. The list goes on. After being bullish on the stock for a while now, I changed my perspective on it recently, as the bank was increasingly beset with challenges. I just don’t see enough reason to do a U-turn again.
I do think, however, that the HSBC share price will be in a less uncertain place in the near future. The US elections, Bank of England’s dividend call, more clarity on the pandemic, and the outlook for the economy are some big drivers to this end. In the meantime, I’m more interested in buying FTSE 100 shares that are already showing stable growth.
Alternatives to buy
The FTSE 100 consumer goods biggie Unilever is one example, whose recent trading update was positive. The company reported sales growth in the latest quarter and has also paid dividends consistently. Hikma Pharmaceuticals is another one. Its latest results showed a 16% increase in earnings per share and its share price has been on the rise too. Despite this, its earnings ratio remains surprisingly low at 12.3 times. This is a stock I’m thinking of buying in the current stock market and economic slump.
Miner Fresnillo is another one I’d consider, for precious metals exposure. It has already run up this year, but I think it can still add a nice hedge to the overall portfolio right now. That’s far more than I can say for the HSBC share price right now.