What’s going on with the HSBC share price?

Jabran Khan delves deeper into the current state of play with the HSBC share price and decides if he would add the shares to his holdings.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

HSBC (LSE:HSBA) shares have rallied in 2022 to date. With that in mind, is the current HSBC share price tempting enough for me to add the shares to my holdings? Let’s take a closer look at what’s happening.

HSBC share price rally

As I write, shares in HSBC are trading for 505p. In 2022 to date, the shares have increased by 12% from 448p to current levels. Although still some way off the 580p pre-market crash price back in February 2020, I feel the price could edge up back towards this pre-crash level in the months ahead.

The HSBC shares’ mini rally in the first two weeks of 2022 doesn’t really offer me an insight toward the longer term outlook. I want to delve deeper into the HSBC share price and consider whether I should buy the shares or not. 

For and against investing

FOR: Shares that are close to or below a price-to-earnings ratio of 10 are generally considered a bargain. At current levels, HSBC shares have a P/E ratio of 11, just over the benchmark and most likely due to the recent rally. HSBC shares look cheap as one of the world’s biggest banks with exposure to many markets throughout the world.

AGAINST: Financial stocks like HSBC are often considered cyclical and closely linked to the world economy. Right now, the world economy looks vulnerable and any recovery post-pandemic is on a knife edge and could go either way. One of my biggest red flags when looking to add shares to my holdings is uncertainty linked to external factors that a firm cannot control.

FOR: HSBC’s most recent trading update, a Q3 update released in October last year, gave me a snapshot at the future outlook, which is favourable. The update would have boosted the HSBC share price. HSBC said revenue expectations are improving and earnings per share levels (EPS) should surpass pre-pandemic levels. Dividend payments should be reinstated with a potential dividend yield of over 4% for the current year of 2022. I am also excited by potential further dividend growth expected in 2023 which is enticing. HSBC had a favourable dividend track record before the market crash and banking-wide dividend payment suspension came into place. I understand forecasts don’t always come to fruition, however.

AGAINST: HSBC’s huge exposure to the Asia-Pacific market is an area of concern for me personally right now. China’s real estate sector is in crisis and HSBC’s exposure to this could derail performance and investment viability too. Many large real estate developers in China are struggling to repay loans. There is a belief that this could lead to economic chaos in one of the world’s largest economies. This would be bad for HSBC and the HSBC share price in my opinion.

My verdict

HSBC shares look cheap at current levels. With the outlook ahead for performance growth and more importantly dividends to return to pre-pandemic levels, I see value in the HSBC share price. For this reason I would be willing to add HSBC shares to my portfolio at current levels.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be considered so you should consider taking independent financial advice.

Jabran Khan has no position in any shares mentioned. The Motley Fool UK has recommended HSBC Holdings. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Young woman working at modern office. Technical price graph and indicator, red and green candlestick chart and stock trading computer screen background.
Investing Articles

2 of the best stocks to buy now with £500

I think that Berkshire Hathaway and Activision Blizzard are two of the best shares to buy today. I think they…

Read more »

Middle-aged white man wearing glasses, staring into space over the top of his laptop in a coffee shop
Investing Articles

I bought 10 cheap shares. Here’s what happened next

After recent price falls, we bought 10 cheap shares for extra passive income in future. This mini-portfolio offers a tasty…

Read more »

Close up view of Electric Car charging and field background
Investing Articles

Is now a good time to buy Chinese EV stocks as economic growth slows?

Chinese EV stocks tend to trade at a considerable discount to their US counterparts. And that's one reason I like…

Read more »

Young woman working at modern office. Technical price graph and indicator, red and green candlestick chart and stock trading computer screen background.
Investing Articles

I’d happily start investing in today’s stock market – here’s why

The stock market has been moving up even as the economy has been looking shakier. Would our writer start investing…

Read more »

Arrow symbol glowing amid black arrow symbols on black background.
Investing Articles

Up 22% in a month! This FTSE 100 takeover target could rise further

A takeover bid for an FTSE 100 firm is big news. Here's what I'm doing about RS Group shares after…

Read more »

Young female analyst working at her desk in the office
Investing Articles

Income shares could help me turn £300 into £500. Here’s how

Our writer believes investing in the right income shares over the long term could be lucrative. Here is his approach.

Read more »

Bearded man writing on notepad in front of computer
Investing Articles

I bought these FTSE 250 shares for fat dividends!

These two FTSE 250 shares have gained in value since I bought them recently. But I still see these stocks…

Read more »

Shot of a young Black woman doing some paperwork in a modern office
Investing Articles

Should I buy this REIT to add to the others that pay me juicy dividends?

Jabran Khan looks closer at this real estate investment trust (REIT) and decides if he would add the shares to…

Read more »