Earlier this week, the HSBC (LSE: HSBA) share price slid below 290p and kept going. At 285p, you’d have to take a financial chart back to 1995 to find a time when the share price was this low. By comparison, during the stock market crash earlier this year, the lows printed were around 440p. And during the global financial crisis in 2008/09, the lows were around 400p.
This hopefully gives you some idea of the position the bank is in right now. For a value investor, the question is therefore raised as to whether this is a great opportunity to buy into the HSBC share price. After all, any stock trading at a level not seen for decades (yes, plural) warrants a closer inspection.
Problems externally
My take on HSBC is that the share price reflects sentiment both internally and externally. Internally, I mean the firm faces specific risks. Externally, I mean the broader economy. Global banks like HSBC are a barometer for the state of play of the worldwide economy. At the moment, this is fragile. Risks include a second wave of Covid-19, the US election, Brexit, and continuing US-China tensions. I recently reviewed some of these risks in more detail here.
Investors reflect the economy’s fragility by selling stock, with a falling HSBC share price. A global bank relies on a strong economy to thrive, so it’s a logical move. Looking at HSBC as a proxy for global risk sentiment, I don’t think it’s undervalued.
Problems internally
The latest catalyst that saw the HSBC share price fall to 1995 levels was an internal one. It was the surfacing of a report from FinCEN that alleges money laundering was allowed to take place at the bank several years ago. This is damaging because, if true, the internal controls of the bank aren’t up to scratch. It also looks bad for the business because, if it wasn’t aware of such activities then, what else could still be going on that management doesn’t know about?
HSBC is already going through a large restructure to slim down the bank and rethink strategy. This is going to take a while to fully complete, during which time I envisage tough times. The news of redundancies earlier this year saw the share price slump in the aftermath. So looking at the share price from an internal viewpoint, again, I don’t think it looks undervalued.
When to buy HSBC shares?
So if I don’t think it’s undervalued now, what should I do? Two things. First, I will be looking to buy HSBC once things settle down. I think it’s a tough road ahead, so will look to buy in at a lower level than currently. In the meantime, there are other stocks I think are undervalued right now. Boohoo Group and ITV are two examples to take a look at.
