HSBC Plunges & Virus Woes

09/21/2020 10:00 am EST


Fiona Cincotta

MarketAnalyst, Currency Live

European bourses are starting the week on the back foot with the FTSE leading the charge lower, states Fiona Cincotta.

Rising covid cases, fears of tighter lockdown restrictions, and a bombshell report on bank’s suspicious transactions. 

Tighter Lockdown Restrictions Coming 

There is a distinct lack of good news as the FTSE kicks off trading for the week. New daily Covid infections continue to rise sharply. With large pats of the UK seeing tighter lockdown restrictions and fears growing that London could be next. British medical advisor Chris Whitty is due to make a public briefing later this morning where warnings that the UK is at a critical point ahead of a very challenging winter are likely to keep sentiment depressed. 

Banks Can’t Stay Out of Trouble 

British banks are back in the spotlight for all the wrong reasons. A report that some of the world’s largest banks enabled flows of dirty money in suspicious transactions over a period of two decades, despite warnings from regulators, is keeping the sector out of favour. HSBC was one of the five global banks, which appeared heavily in the report, along with Standard Chartered, JP Morgan Chase & Co, Deutsche Bank, and Bank of New York Mellon Corp.  

Whilst it has been a while since the last banking sector scandal, it hasn’t been long enough. This is a sector, which constantly appears to struggle to stay on the right side of regulators and the law.  

HSBC at 25-Year Low 

Heavyweight HSBC Holdings (HSBC) is a standout loser as the global bank faces trouble on several fronts as it is caught up in political turmoil and an economic slump. In fact, things couldn’t get much worse for the bank, which is reeling under Covid pressures and its increasingly difficult position in no-man's land, supported by neither the East or the West. 

Not only is the suspicious transaction report extremely damaging, but the bank is on the brink of being added to China’s “unreliable entity” list, potentially threatening its plans to expend into China. 

The so-called unreliable entity list looks to punish firms that damage national security. Should HSBC find itself on the list, the bank will experience problems expanding into Mainland China after investing heavily in directing the business that way over the past few years. 

The stock is trading at a 25-year low and the outlook is troubling at best. 

Looking Ahead 

The economic calendar is light in Europe and the US. US tech stocks will remain in focus, with fears of the selloff continuing despite progress in the TikTok WeChat saga. 

FTSE Chart


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