|Bid||24.39 x 2200|
|Ask||24.49 x 3000|
|Day's Range||24.02 - 24.38|
|52 Week Range||22.67 - 41.90|
|Beta (5Y Monthly)||0.51|
|PE Ratio (TTM)||27.11|
|Forward Dividend & Yield||N/A (N/A)|
|Ex-Dividend Date||Feb 27, 2020|
|1y Target Est||26.99|
HSBC Holdings Plc has decided to close its industrial metals business, it told Reuters on Friday, as Europe's largest bank pushes ahead with plans to cut around 35,000 jobs. HSBC was a small player in industrial metals. "We remain focused on growing our leading position in precious metals," an HSBC spokesman said, declining to comment further.
European stock markets are set to open just higher on positive signs of a global economic recovery, but ranges will be tight with the U.S. markets on holiday and the number of coronavirus cases still mounting. At 2:25 AM ET (0605 GMT), the DAX futures contract in Germany traded 0.5% higher, the FTSE 100 futures contract in the U.K. up 0.2%, and CAC 40 futures in France up 0.4%. The U.S. accounts for around a quarter of the 10.8 million coronavirus cases recorded worldwide.
(Bloomberg Opinion) -- The national security law China imposed on Hong Kong this week will damage civil liberties with long jail sentences and grant immunity to Chinese agents working in the territory. For investors who depend on the city as a financial center, though, there may be an extra sting in the tail.The law could increase self-censorship by Hong Kong’s analysts and economists, and damage the credibility of research reports, the Financial Times reported this week. The need to maintain relationships with mainland clients has influenced coverage in the past, but many fear the new law will exacerbate this trend.It’s a bit late to be worrying about that, though. Self-censorship isn’t just a matter of avoiding gratuitous digs and glib phrases. If you look at the ratings given by equity analysts in recent years, it seems to include portraying companies with strong mainland connections as better investments than they actually are.Take the 50 companies on the Hang Seng Index. You can easily break them into three groups: 15 Chinese state-owned enterprises, or SOEs, such as Bank of China Ltd. and PetroChina Ltd.; 13 civilian-controlled mainland Chinese businesses, or COEs, such as Tencent Ltd. and Sino Biopharmaceutical Ltd.; and 22 other, mostly locally controlled stocks, such as HSBC Holdings Plc, CK Hutchison Holdings Ltd. and AIA Group Ltd(1). Then look at the extent to which analysts’ consensus target prices have exceeded actual stock prices in recent years. SOEs get the most favorable treatment, with target prices exceeding actual prices by an average of 24% since the start of 2016, compared to 16% for the COEs and 13% for non-mainland companies.It’s not just in Hong Kong that brokers’ target prices tend to run higher than the actual market — there’s a reason they’re called sell-side analysts. China is still an emerging market, too, so it’s not impossible that its stocks simply have more upside than those operating out of a mature economy such as Hong Kong. So perhaps the reason state-owned enterprises get a target price premium over local companies is simply that they’re better investments that will deliver higher returns to investors?If only. Thanks to booming tech and biotech stocks and the huge run-up in prices during 2017, civilian-owned Chinese companies did achieve pretty stunning average total returns of 31% over the past four-and-a-half years. SOEs, however, averaged a measly 1.9%, far less than the 6.1% achieved by the non-mainland stocks.It’s not totally irrational that possessing a wealthy patron should be seen as an advantage for some investments. The Chinese state tends to put its thumb heavily on the scales in favor of its own organs, with diminishing benefits the further you get from the commanding heights of the economy, as my colleague Shuli Ren has written.In particular, it’s logical for credit analysts to give state-owned enterprises a better rating than those that can’t count on the backing of the Chinese government to bail them out. Even there, you’ve not been paying attention if you think the interests of private bondholders are going to be treated equally with those of better-connected investors.Still, when looking at the equity market, the proof should be in the pudding. If analysts predict a stock will consistently outperform — as they tend to do in relation to SOEs — then it should do that. If not, they’re either bad at their jobs or misleading their clients.There are many things to worry about in Hong Kong’s new national security law. The integrity of equity research is probably not one of them. Sell-side brokers themselves gave that away long ago.(1) We've equal-weighted each of these baskets of stocks so that a few stocks with huge market caps like Tencent, HSBC or China Construction Bank don't skew the overall result.This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.David Fickling is a Bloomberg Opinion columnist covering commodities, as well as industrial and consumer companies. He has been a reporter for Bloomberg News, Dow Jones, the Wall Street Journal, the Financial Times and the Guardian.For more articles like this, please visit us at bloomberg.com/opinionSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
Congress on Thursday passed a bill to impose sanctions on Chinese officials threatening Hong Kong’s autonomy. Here’s what investors need to know.
HSBC Bank USA, N.A. ("HSBC USA"), part of HSBC Group, one of the world’s largest banking and financial services companies, today announced it will provide $10 million to support the New York Forward Loan Fund (NYFLF), part of Governor Andrew M. Cuomo’s initiative to reinvigorate New York’s smallest businesses, landlords and critical non-profits. The NYFLF will provide affordable and flexible capital to participating Community Development Financial Institutions (CDFIs) so they can make rapid recovery loans in communities hard hit by the COVID-19 health and economic crisis.
British Foreign Secretary Dominic Raab reprimanded HSBC and other banks on Wednesday for supporting China's new security law, saying the rights of Hong Kong should not be sacrificed for bankers' bonuses. Senior British and U.S. politicians criticised HSBC and Standard Chartered last month after the banks backed China's national security law for the territory. "On HSBC and banks, I've been very clear in relation with HSBC and ... all of the banks: the rights and the freedoms and our responsibilities in this country to the people of Hong Kong should not be sacrificed on the altar of bankers' bonuses," Raab told parliament.
The former co-chief executive of the world's biggest hedge fund and newly elected chairwoman of Finra, the US securities industry's self-regulatory arm, is joining HSBC's board as an independent director effective Wednesday, the bank said.Eileen K Murray, 62, was one of the highest-ranking female executives in the hedge fund industry when she stepped down earlier this year from Bridgewater Associates, the investment firm started by Ray Dalio that manages about US$160 billion. She had been with the firm since 2009 and served as its co-chief executive since 2011.On Tuesday, Finra said its board of governors unanimously elected Murray to serve as its new chairwoman beginning in August."I am absolutely delighted to welcome Eileen," Mark Tucker, the HSBC chairman, said in a statement. "Her wealth of experience across banking and finance, together with her extensive knowledge of financial technologies and corporate strategy, will bring an invaluable perspective to the board."Murray began her career at Morgan Stanley in 1984, serving as the bank's controller, treasurer and head of global technology and operations, as well as chief operating officer for its institutional securities group. She also had stints at Credit Suisse and as president of Duff Capital Advisors.The Wall Street Journal last year reported Wells Fargo contacted Murray about its open CEO position and had been interviewed previously by Uber Technologies about a high-level role.In her newly created position on the board, Murray will serve as a member of HSBC's group audit committee, group risk committee and its nomination and corporate governance committee.Murray will be paid total fees of £244,000 (US$302,295) a year in her board role. Her appointment is subject to election by shareholders at the 2021 annual general meeting for a three-year term.Her appointment comes at a challenging time for HSBC, which is based in London, but makes most of its profit in Asia.The economy in Hong Kong, its biggest market, has been hit hard by months of anti-government street protests and the coronavirus pandemic, which has disrupted economies across the globe. The city's economy is expected to contract by as much as 7 per cent this year.The bank, which is in the middle of its third major restructuring in a decade under chief executive Noel Quinn, is navigating a difficult operating environment as central banks have pushed interest rates to historic lows to stimulate economies hurt by months of lockdowns and lower business activity.HSBC was forced in March to pause its plan to eliminate 35,000 jobs as the pandemic worsened this spring. The bank announced last month that it would resume those cuts as its plan to reduce annual costs by US$4.5 billion "are even more necessary today". The cost cuts are expected to be fully implemented by 2022.The bank also found itself embroiled in rising tensions between Beijing and Washington over a controversial national security law tailored for Hong Kong by China's top legislative body, the National People's Congress (NPC).HSBC is among a group of businesses that rely heavily on Hong Kong that publicly supported the law, alongside its rival Standard Chartered; Jardine Matheson Group, the owner of the Mandarin Oriental hotel; and Swire Pacific, the parent of air carrier Cathay Pacific.Politicians in the United States and the United Kingdom have condemned China over the adoption of the law, with US Secretary of State Mike Pompeo saying it destroyed the city's autonomy.The law was approved by the NPC's standing committee on Tuesday on the eve of the 23rd anniversary of Hong Kong's return from British to Chinese rule. It criminalises acts of secession, subversion, terrorism and collusion with foreign and external forces that jeopardise national security.This article originally appeared in the South China Morning Post (SCMP), the most authoritative voice reporting on China and Asia for more than a century. For more SCMP stories, please explore the SCMP app or visit the SCMP's Facebook and Twitter pages. Copyright © 2020 South China Morning Post Publishers Ltd. All rights reserved. Copyright (c) 2020. South China Morning Post Publishers Ltd. All rights reserved.
The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. Insider Monkey finished processing 821 13F filings submitted by hedge funds and prominent investors. These filings show these funds' portfolio positions as of March 31st, 2020. […]
Hong Kong police fired water cannon and tear gas and arrested more than 300 people on Wednesday as protesters took to the streets in defiance of sweeping security legislation introduced by China to snuff out dissent. Beijing unveiled the details of the much-anticipated law late on Tuesday after weeks of uncertainty, pushing China's freest city and one of the world's most glittering financial hubs on to a more authoritarian path. As thousands of protesters gathered for an annual rally marking the anniversary of the former British colony's handover to China in 1997, riot police used pepper spray and fired pellets as they made arrests after crowds spilled into the streets chanting "resist till the end" and "Hong Kong independence".
(Bloomberg Opinion) -- As Keith Skeoch prepares to step down as chief executive officer of Standard Life Aberdeen Plc, the report card on his tenure reads: “A for Effort, B for Achievement.”By the time he leaves in the third quarter, it will have been three years since he and former Aberdeen Asset Management CEO Martin Gilbert engineered the merger of their respective firms in August 2017. The deal was designed to create an asset manager that could compete in what Gilbert dubbed “the $1 trillion club.” The reality has turned out to be somewhat different.Size has proven to offer scant defense against the trends buffeting the fund management industry, including money flowing away from active managers and into low-cost, index-tracking products, increased regulatory scrutiny and relentless downward pressure on what firms can charge for managing other people’s money.It’s impossible to test the counterfactual Skeoch has stressed: that Standard Life and Aberdeen would have fared even worse as standalone firms. But for shareholders, the union has been less than blessed.Douglas Flint, who took over as chairman in January 2019, has been a catalyst for change. Two months after his arrival, the company abandoned the dual CEO structure it had operated since the merger, with Skeoch taking sole control. Gilbert said he wanted to avoid having Flint “tap me on the shoulder and say ‘come on, it’s time to go.’” Flint’s previous role as chairman of HSBC Holdings Plc was probably instrumental in the choice of Skeoch’s successor, Stephen Bird, who ruled himself out as a potential candidate for the top job at HSBC earlier this year. Bird’s career experience during 21 years at Citigroup Inc., most recently as head of its global consumer banking unit, after acting as the bank’s top executive in Asia, gives a strong hint as to where Standard Life Aberdeen expects its future growth to come from.Geographically, Asia is at the top of every fund manager’s list of potential customer growth; Bird’s contact book should help open doors in the region. And Standard Life Aberdeen’s wealth management division, which “has not lived up to potential,” according to a Tuesday research note from Hubert Lam at Bank of America Corp., will be in renewed focus.I wrote in December that Flint might be tempted to tap Skeoch on the shoulder if the firm’s performance didn’t improve. Still, his departure is a surprise, and it’s a shame he couldn’t go out on a higher note by delivering a boost to assets under management and a share price worth more than half its value since the merger. Whether his successor’s lack of asset management experience will prove a blessing or a curse remains to be seen.This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Mark Gilbert is a Bloomberg Opinion columnist covering asset management. He previously was the London bureau chief for Bloomberg News. He is also the author of "Complicit: How Greed and Collusion Made the Credit Crisis Unstoppable."For more articles like this, please visit us at bloomberg.com/opinionSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
HSBC is facing more questions over its public support of a controversial national security law for Hong Kong.Federated Hermes is the latest organisation to raise concerns about HSBC's backing of the legislation after Aviva Investors publicly rebuked the London-based lender and its rival Standard Chartered earlier this month over the new law.The asset manager, which has a long history of focusing on environmental, social and governance (ESG) issues, said it was "engaging" with HSBC to "fully understand" the bank's position as part of its EOS stewardship service, which acts on behalf of institutional investors. Federated Hermes has £859 billion (US$1.06 trillion) in assets under advice globally."We have questions on the bank's statement amid concerns that the new law may have an adverse impact on human rights in Hong Kong," Roland Bosch, the lead engager for financial services EOS at Federated Hermes, said in a statement. "We expect companies to support improvements in protections for citizens and not back their removal."Federated Hermes previously told the South China Morning Post that it actively screens for allegations of human rights violations as part of its investment process.Bosch's comments were first published in the British tabloid The Mail on Sunday and shared with the Post on Monday.A HSBC spokeswoman declined to comment on Monday.The National People's Congress (NPC), China's top legislature, said in May that it would draft a national security law for Hong Kong following months of pro-democracy street protests, prompting concerns the legislation could be used to restrict speech and assembly in the city.The legislation is designed to prevent, stop and punish acts of secession, subversion, terrorism and collusion with foreign forces to endanger national security and is expected to be passed imminently by the NPC's standing committee. It is expected to carry a maximum penalty of life in prison.It sparked an outcry by Western governments, with the US imposing visa restrictions on Chinese officials over the law and China threatening to retaliate with its own restrictions on US individuals who "behave egregiously" in relation to Hong Kong affairs.Peter Wong Tung-shun, HSBC's Asia-Pacific chairman, signs a petition to support the national security law for Hong Kong. Photo: SCMP Handout alt=Peter Wong Tung-shun, HSBC's Asia-Pacific chairman, signs a petition to support the national security law for Hong Kong. Photo: SCMP HandoutOn June 3, the bank posted a photo to one of its social media accounts in the mainland of Peter Wong Tung-shun, its Asia-Pacific chief executive and a member of the Hong Kong delegation of the Chinese People's Political Consultative Conference, signing a petition organised by a Beijing-loyalist group supporting the law."As a member of Hong Kong Association of Banks (HKAB), consistent with the statement issued on 26 May by HKAB, we reiterate that we respect and support laws and regulations that will enable Hong Kong to recover and rebuild the economy and, at the same time, maintain the principle of 'one country two systems,'" the bank said in the social media post. "We are fully committed to playing our part in supporting Hong Kong now and in the future."HSBC is not alone among business titans supporting the law. The city's biggest companies and most of its tycoons have spoken out in favour of the legislation, including Jardine Matheson Group, the operator of the Mandarin Oriental hotel; Swire Pacific, the parent of airline Cathay Pacific; and Li Ka-shing, one of Asia's richest men.US and UK politicians have criticised the bank's decision, but most investors have remained silent on the issue.Aviva Investors, the asset management arm of UK insurer Aviva, and Federated Hermes, on behalf of the institutional investors it represents, are among the few that have expressed their concerns publicly.This article originally appeared in the South China Morning Post (SCMP), the most authoritative voice reporting on China and Asia for more than a century. For more SCMP stories, please explore the SCMP app or visit the SCMP's Facebook and Twitter pages. Copyright © 2020 South China Morning Post Publishers Ltd. All rights reserved. Copyright (c) 2020. South China Morning Post Publishers Ltd. All rights reserved.
Reforms to the global financial system following the banking crisis a decade ago have cut the risk of taxpayers having to rescue lenders again but some gaps still need plugging, the Financial Stability Board (FSB) said on Sunday. After the crisis the FSB, which coordinates regulation for the Group of 20 rich and emerging economies (G20), introduced rules that require the world's biggest banks like Goldman Sachs, HSBC and Deutsche Bank, to issue special debt that can be written down in a markets meltdown. This and other reforms sought to prevent banks being "too big to fail" - when governments ride to their rescue if they are in serious trouble.
We've lost count of how many times insiders have accumulated shares in a company that goes on to improve markedly...
(Bloomberg) -- The prospects for HSBC Holdings Plc and other banks to recover losses from a failed Singapore oil trader are dimmer than originally thought after an accounting review found the energy firm overstated assets by $3 billion and fabricated documents on a “massive scale.”Hin Leong Trading (Pte) Ltd. has assets of about $257 million, or 7% of its estimated $3.5 billion in liabilities, the company’s interim managers said in a report to Singapore’s High Court on Tuesday. That’s less than half the assets estimated by founder Lim Oon Kuin and his son Evan Lim, according to earlier affidavits to the court.HSBC is among 23 banks owed almost $4 billion by Hin Leong, one of the largest traders in Singapore before its collapse in April following a plunge in oil prices that exposed what the report found were “manipulated” accounts and frequent double counting of cargo to keep credit lines flowing.“The scale and regularity of the fabrication suggests that the practice was routine and pervasive,” the report found. “These forged documents enabled the company to mislead banks in extending financing to the company and also acted as supporting documentation for the fictitious gains and profits.”HSBC, the London-based bank with the most exposure to Hin Leong at about $600 million, declined to comment on the report. Hin Leong didn’t respond to email inquiries seeking comment. The court filing was earlier reported by Reuters and Singapore’s Straits Times.Hin Leong “systematically manipulated its accounts to inflate the value of its accounts receivables” to present an exaggerated picture of its financial health, according to the report by PricewaterhouseCoopers LLC’s Chan Kheng Tek and Goh Thien Phong. Chan and Goh, who were appointed in April as interim judicial managers to oversee the company, added that Hin Leong has “no reasonable prospect” of rehabilitation as a standalone entity.Legal DisputesThe trading house and its sister companies owned by the Lim family should be put together as an integrated trading platform to be restructured, while the Lims should inject their personal assets, the managers said in the report. The Lims, who received dividends totaling $90 million in the 2018 and 2017 fiscal years, haven’t responded to this suggestion via their legal advisers, according to the report.The Hin Leong collapse has sparked several legal disputes among banks and other creditors seeking to recover losses from the debacle. Sinopec last month lost a legal bid to halt a loan payment, while Winson Oil Trading Pte. Ltd. took Oversea-Chinese Banking Corp. to court, demanding payment for a sale of fuel tied to Hin Leong.Hin Leong’s audited financial statements for the financial year ended in October overstated the value of its assets by at least $3 billion, according to the report. This overstatement comprised $2.23 billion in accounts receivables that have no prospect of recovery, and $800 million in inventory shortfalls, it said.As part of the alleged manipulation, Hin Leong transfered money among its various bank accounts to give the false impression that accounts receivables were collected, when no payments were received, the managers said. This not only inflated the value of the balances, but also gave it an appearance of legitimacy by ensuring that the accounts were kept current, they said.The moves helped conceal significant losses, the managers said, adding that Hin Leong suffered derivatives trading hits of about $808 million over the past decade.Non-Existent CargoAmong its $3.5 billion in liabilities, there are about 273 outstanding letters of credit facilities issued by 23 lenders, the report said. About 60 of them, amounting to $1.5 billion, were used in bilateral or multi-party transactions in which Hin Leong would buy and sell the same cargo on the same date, or within a short interval, at a loss. These trades were done for the sake of obtaining liquidity, the report said.In other instances, the company would sell and buy back non-existent cargo from its counterparty for financing, the report said. Other transactions included purchasing cargo only to sell it back simultaneously without taking physical delivery.The PwC report said the company and founder OK Lim haven’t replied to questions from the managers, nor stated whether or when they will respond. Lim’s lawyers said he is unwell and won’t be able to assist “for a prolonged period of time,” according to the report.(Adds HSBC declined to comment in fifth paragraph)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
European stocks advanced on Tuesday, getting a lift on hopes the economy will continue to recover without a spate of new virus cases throwing lockdown-easing measures off course.
Report from HSBC and The Sustainability Consortium urges businesses to prepare supply chains for climate change and helps them understand risks
HSBC faces a £1.3bn lawsuit brought by 371 investors relating to a Disney film financing scheme that was deemed to be a tax avoidance vehicle by HM Revenue & Customs. The investors have filed a claim at London’s High Court against HSBC UK for alleged losses caused by the role of its private bank in the development and marketing of a series of film financing schemes known as the Eclipse Partnerships.
After a series of attacks by Chinese media and netizens on HSBC's business culminating in one report suggesting it may be forced to exit the world's second-biggest economy, the bank came out swinging on Friday.The London-headquartered bank pushed back against "groundless" rumours casting doubt over about the future of its mainland China business on social media platform WeChat after it announced this week it would resume 35,000 planned job cuts globally.The bank, which is based in London, but generates most of its profit in Asia, said China remains "an important strategic market" for the bank and has been so for more than 150 years, noting it has been a "staunch supporter and active participant" in the country's opening up over the past 40 years."Going forward, we will continue to invest in our China business, services, talents and technology. As always, we will continue contributing to the sustainable development of China's economy," the bank said in a post in Chinese on its official WeChat account.The bank, one of three lenders authorised to issue currency in Hong Kong, has been slammed by mainland media and netizens across China in the past 18 months over its involvement in a US inquiry into Huawei Technologies Company and for not immediately showing public support for a controversial national security law tailored for Hong Kong.Global Times, a nationalistic tabloid affiliated with Communist Party mouthpiece People's Daily, speculated this week that the bank's resumption of planned job cuts as part of a massive restructuring "may mark the beginning of the end for the embattled British bank in China".The tabloid newspaper, which publishes both a Chinese and an English edition, on Wednesday also quoted an unnamed Beijing "observer" who said the bank could be pushed out of the mainland market over the Huawei situation.HSBC announced in February that it would cut its headcount by 35,000 as part of an effort to reduce its annual costs by US$4.5 billion by 2022 in its third major reshaping in a decade. As the coronavirus pandemic worsened globally in March, the bank said it would temporarily pause the "vast majority" of those lay-offs.On Wednesday, Noel Quinn, the HSBC chief executive, said the bank planned to resume the job cuts as the efforts to reduce the company's costs was "even more necessary today" given the economic outlook. As part of the restructuring plan, the bank is doubling down on growth markets in Asia, particularly the future growth of the Greater Bay Area.In May, HSBC agreed to take full control of its Chinese life insurance joint venture as it took advantage of new rules that have further opened up China's financial services industry.HSBC did not name the Global Times in its statement on Friday.In a June 4 commentary about HSBC's support of the national security law, the Global Times said, "we still need to watch HSBC's moves in the future related to issues such as Huawei. There is a bottom line that HSBC can't cross, otherwise the bank could lose the China market."The bank was forced to go on a charm offensive in Beijing last summer after providing documents to US prosecutors in an investigation into the Chinese telecommunications company, which saw Huawei chief financial officer Meng Wanzhou arrested in Canada on US charges.HSBC quietly told Beijing officials at the time that it had no choice but to comply because it had an obligation under US financial regulations to do so. Wanzhou is fighting extradition to the US, and her lawyers have accused US prosecutors of misleading a Canadian court about their evidence in the case.Peter Wong Tung-shun, HSBC's Asia-Pacific chief executive, signed a petition supporting a controversial national security law for Hong Kong. Photo: Handout alt=Peter Wong Tung-shun, HSBC's Asia-Pacific chief executive, signed a petition supporting a controversial national security law for Hong Kong. Photo: HandoutThe bank also was criticised by former Hong Kong chief executive Leung Chun-ying on his Facebook page on May 29 for staying silent on the national security law for Hong Kong, which some fear could restrict free speech and other liberties in the city.A few days later, the bank posted a photograph of its Asia-Pacific CEO Peter Wong signing a petition in support of the law and publicly supported the legislation on one of its social media accounts in the mainland.Lawmakers in the US and the UK have since criticised HSBC and its Hong Kong rival, Standard Chartered, expressing support for the law."We respect and support laws and regulations that will enable Hong Kong to recover and rebuild the economy and, at the same time, maintain the principle of 'one country two systems'," HSBC said in a carefully worded social media post. "We are fully committed to playing our part in supporting Hong Kong now and in the future."HSBC's shares rose 0.67 per cent to close at HK$37.35 in Hong Kong on Friday.This article originally appeared in the South China Morning Post (SCMP), the most authoritative voice reporting on China and Asia for more than a century. For more SCMP stories, please explore the SCMP app or visit the SCMP's Facebook and Twitter pages. Copyright © 2020 South China Morning Post Publishers Ltd. All rights reserved. Copyright (c) 2020. South China Morning Post Publishers Ltd. All rights reserved.
(Bloomberg Opinion) -- China’s banks are once again being asked to martyr themselves to the economy, forgoing profits to redirect funds toward capital-starved businesses. This won’t resolve the web of problems the financial system is caught up in.The State Council has urged banks to return 1.5 trillion yuan ($211 billion) to the real economy in the form of low-cost loans to small and medium companies. That’s a big ask, amounting to about 75% of net profit, almost a quarter of revenue and 9% of capital buffers, according to Goldman Sachs Group Inc. In theory, it will save billions of dollars of interest expense for companies by pushing down implied lending rates. In reality, Beijing is acknowledging the deep dysfunction in its financial system and smacks of desperation. The latest demands follow a host of aggressive measures by regulators in recent weeks, including moratoriums on repayments and buying new loans from banks, which will help free up a corner of their balance sheets. That Beijing is now asking financial institutions to effectively forego top-line growth to get money where it should be going anyway points to the ineffectiveness of small lenders, one of the largest direct suppliers of credit to the economy.That’s nowhere more apparent than in the Chinese hinterland, where these regional institutions are a major source of financing for small and medium companies. They have overextended themselves and become warehouses of bad risk. On Thursday, Caixin reported regulators were planning to allow local governments to replenish the capital of small and midsize lenders by as much as 200 billion yuan, citing people familiar with the matter. Of the 4,005 such banks in China, 15% didn’t meet minimum capital requirements. Authorities are aware that some lenders won’t be able to comply with the latest edict — the ones that can are those with enough liquidity and capital, not those they’ve had to bail out.The problem isn’t the price or quantity of credit, though. It’s the persistent and well-known challenge of transmission, getting each yuan where it’s needed most. Beijing has always controlled borrowing costs and been able to inject (or suck out) gobs of money when necessary. It has moved rates up when leverage starts rising, and lowered them when it wants to stimulate borrowing. With the hit from Covid-19, the ratio of credit to gross domestic product could go as high as 286%, HSBC Holdings Plc estimates. In May, so-called total social financing grew 12.5% from a year earlier. Rates have been pushed so low that they have encouraged arbitrage and a buildup of leverage. But measures to make transmission more effective haven’t done much and the financial plumbing remains clogged. The central bank’s various tools, including cutting the reserve ratio requirement, haven’t been able to lower rates. In fact, they have become less effective over the last few years in bringing down lending costs. The loan prime rate, for instance, which has become a de facto benchmark, hasn’t had the desired effect, even though officials have tweaked it in recent months.Things will only get worse from here. Bank balance sheets, the main channel between the financial system and the real economy, aren’t being strengthened or cleaned up. In fact, asset quality is deteriorating and the ability to digest the non-performing loans is shrinking as capital buffers are eroded.For investors, all the bank capital and preferred shares coming to market as these institutions try to safeguard their cushions will have a new layer of risk – one they can’t quantify. Those hefty Chinese bank dividends may also come into question as profit growth is compromised. For Beijing, pulling on the same levers again and again won’t work. Cleaning up balance sheets will. This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Anjani Trivedi is a Bloomberg Opinion columnist covering industrial companies in Asia. She previously worked for the Wall Street Journal. For more articles like this, please visit us at bloomberg.com/opinionSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
(Bloomberg Opinion) -- HSBC Holdings Plc had little choice. It’s a measure of how much the world has changed that the 35,000 job cuts it announced in February, a plan that looked like radical surgery at the time, are now almost certainly inadequate. The economic damage wreaked by Covid-19 and the political quagmire into which the bank has sunk over its support for a national security law in Hong Kong meant that a return to retrenchment was inevitable sooner rather than later.The London-based bank has restarted its cost reduction program, according to a memo from Chief Executive Officer Noel Quinn, having placed it on pause in March as the pandemic spread. The plan calls for HSBC to eliminate those jobs over three years and shed $100 billion in risk-weighted assets by shrinking its underperforming U.S. operations and European businesses and cutting back on its investment bank.Few expected HSBC to hold out indefinitely. The longer the virus lasts, the more bad loans will accumulate and the heavier will weigh its network of 235,000 employees across 64 countries. The bank, a major player in trade finance, warned in February that it could face more credit losses from disruption to supply chains. Since then, worsening geopolitical tensions between China and the U.S. have added a further negative. A strong first quarter for fixed-income and foreign-exchange trading will be hard to sustain. Improving its paltry 1.9% return on equity is a priority. JPMorgan Chase & Co., comparable in size with a workforce of 257,000, has an ROE of 15%.The controversy over Hong Kong provides an added incentive for HSBC to push ahead with its transformation. The bank has upset the U.S. and the U.K. by its stance on the security bill, with HSBC’s Asia head Peter Wong signing a petition this month in support of the legislation that China is imposing on the former British colony. Hong Kong contributes 54% of profit and a third of global revenue. Most of the job cuts are targeted at less profitable or money-losing units in other regions. HSBC has made its choice and may as well follow through: Expect an acceleration of the “pivot to Asia” begun under Quinn’s predecessor Stuart Gulliver five years ago.Granted, HSBC cannot afford to give up its global footprint or alienate Washington. Its status as a dollar-clearing bank is valuable, and many of China’s biggest banks use HSBC’s system to trade in the U.S. currency. Multinational clients may be less inclined to stick with HSBC for European and U.S. business as it scales back. At the same time, it has an opportunity to strengthen its hold as a corporate bank for multinationals operating in China.Challenges remain even in the market on which HSBC has bet its future. The bank is still a target of suspicion in China after providing U.S. prosecutors with information that led to the arrest of Huawei Technologies Co.’s chief financial officer in late 2018. Having sided with authorities over the security bill, it also risks alienating a large part of its customer base in Hong Kong. HSBC already drew the ire of pro-democracy protesters in the city after closing an account linked to the movement last year. And the axing of its dividend in April stung the bank’s base of small shareholders in Hong Kong.Walking that tightrope is unlikely to get any easier. In the meantime, HSBC has plenty of tasks to get on with elsewhere in the world. The bank is already looking for a buyer for its French retail operations. A tiny U.S. retail presence and sub-scale businesses in countries such as the Philippines and New Zealand are among unneeded units that could go. Hong Kong, at least, can expect gentler treatment for now. (Corrects chart to insert missing Europe bar.)This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Nisha Gopalan is a Bloomberg Opinion columnist covering deals and banking. She previously worked for the Wall Street Journal and Dow Jones as an editor and a reporter.For more articles like this, please visit us at bloomberg.com/opinionSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
The following are the top stories on the business pages of British newspapers. - The administrator of Neil Woodford's failed investment fund has been accused of delivering "a slap in the face" to investors with its recent 224-million-pound ($281.32 million) deal to sell a host of the fallen stock-picker's biotechnology stakes. Reliantco Investments, a Cypriot trading firm promoted by the former rugby player Mike Tindall, has pulled out of Britain amid scrutiny of overseas investment schemes.
European stocks pushed higher on Wednesday, as hopes for global stimulus continued to drive gains, even amid worrying coronavirus outbreaks in Beijing and the U.S., and rising geopolitical tensions between China and India and the two Koreas. Tuesday’s session in the U.S. saw the Dow (DJIA) climb 536 points, boosted by strong retail sales data, but off its best levels after Federal Reserve Chairman Jerome Powell suggested more fiscal stimulus may be needed as the U.S. recovery from the pandemic would be slow. Reports that the administration of U.S. President Donald Trump is preparing a $1 trillion infrastructure plan continued to juice markets a little, though analysts said the delivery of such a package before the November election was unlikely.
Deutsche Bank says there is at least a one-in-three chance that at least one of four major tail risks will occur within the next decade.
HSBC (HSBC) is embarking on plans to slash about 35,000 jobs which it put on ice after the coronavirus outbreak, as Europe’s biggest bank struggles with the impact on its already shrinking profits.It will also maintain a freeze on almost all external hiring, Chief Executive Noel Quinn said in a memo sent to HSBC’s 235,000 staff worldwide and seen by Reuters.“We could not pause the job losses indefinitely - it was always a question of ‘not if, but when’,” Quinn said, adding that the measures first announced in February were “even more necessary today”.An HSBC spokeswoman confirmed the contents of the memo to Reuters.HSBC had delayed the job cuts, part of a wider restructuring to cut $4.5 billion (£3.5 billion) in costs, in March saying the extraordinary circumstances meant it would be wrong to push staff out.However, Quinn said it now had to resume the program as profits fall and economic forecasts point to a challenging time ahead, adding that he had asked senior executives to look at ways to cut more costs in the second half of 2020.Most of the job cuts are likely in the back office at Global Banking and Markets (GBM), which houses HSBC’s investment banking and trading, according to the Reuters report. The cuts will also affect senior bankers in Britain who work in GBM and HSBC’s head office, as well as support staff in its businesses around the world.The resumption of job cuts is unlikely to affect the timing or size of dividends HSBC may pay in the future, with that decision likely to be dependent more on the economic outlook for next year and beyond, assuming regulators approve shareholder payouts once more.Shares in HSBC have been on a downward trend since the beginning of the year and have lost about 28% of their value since the pandemic outbreak in March. The stock rose 1.3% to $24.14 at the close on Tuesday.Merrill Lynch analyst Alastair Ryan cut the stock’s rating to Hold from Buy, saying that the global lockdown could impact the bank’s earnings enough to mean two years of an uncovered dividend with a likely dividend cut lying ahead.Still looking beyond the pandemic, Ryan provides a cautiously optimistic view saying: “We also take considerable comfort from HSBC’s historically robust underwriting. And once the significant operational dislocation of the lockdowns has passed, we see HSBC delivering on its restructuring, which refocuses the group on its strongest franchises and higher-growth markets.”In line with Ryan’s rating, the Street has a Hold analyst consensus on the stock. Meanwhile, the $52.76 average price target implies a whopping $119% upside potential in the shares in the coming 12 months. (See HSBC stock analysis on TipRanks).Related News: KKR-Led Consortium Buys 6% Stake In Vietnam’s Vinhomes For $650 Million Facebook And PayPal Invest In Indonesian App Gojek Goldman Sachs: These 2 Stocks Are Poised to Surge by at Least 30% More recent articles from Smarter Analyst: * Google Snaps Up Canadian Smart Glasses Startup North * AMC Delays Theatre Openings; Top Analyst Cuts Price Target * Inovio Presents ‘Positive’ Early Data For Covid-19 Vaccine Candidate; Shares Plunge 12% * Wells Fargo Plans To Cut Its Dividend In Q3; Top Analyst Lowers Price Target