HSBC (LSE:HSBA) shares seemed unstoppable at the end of February, reaching an all-time high of 1,410p. Since the Iran war started five weeks ago though, the stock has declined by around 11%.
Therefore, anyone who invested £10,000 in the FTSE 100 bank back then would now have less than £9,000. However, the same amount invested five years ago would today be worth approximately £30,400, even after March’s pullback.
Including reinvested dividends, the total return would be around £34,000. Not bad for a dull ‘old economy’ stock!
Asian growth markets
I bought HSBC stock at 604p in early 2024. With the share price now above 1,250p, I’ve basically doubled my investment, before dividends.
Looking back to the period when I first invested, I wrote: “I expect the bank’s increasing focus on China and Asia to pay dividends (literally). The region is expected to boom in the decades ahead as middle classes expand and prosper. And HSBC will be there to serve them“.
Fast forward to now, my investment thesis hasn’t changed. Indeed, I’m more convinced than ever that significant institutional money will flow towards Asian markets over the next decade, driven by increasingly unpredictable US policy.
If I’m right, this should benefit HSBC, which has significant exposure to Hong Kong, mainland China, India, and Singapore. The lender has also opened up its first Middle East wealth centre in the UAE, where I hear quite a few well-off people reside.
But are HSBC shares worth considering after the 10% dip? I think so. The forward price-to-earnings (P/E) ratio isn’t particularly high at 9.7, while there’s an attractive 5.15% forward dividend yield.
Share buybacks are currently on hold after HSBC bought the 37% stake it didn’t already own in Hong Kong’s Hang Seng Bank for $13.6bn. But buybacks are widely expected to resume sooner rather than later.
The Middle East war clearly adds near-term uncertainty, as HSBC has been selectively increasing its exposure to the region. If there’s a global economic downturn, then banks and their shareholders will likely feel the pain.
As mentioned though, I’m still bullish on HSBC long term.
Boku
Another interesting UK stock is Boku (LSE:BOKU). With a £493m market cap, this is the equivalent of a stickleback compared to HSBC.
However, it’s also riding Asia’s vibrant economies by helping Western companies expand in the region. Its platform makes it easier for unbanked users to pay for goods and services via their smartphones.
Last year, revenue increased 30% to $128.8m, with adjusted EBITDA jumping 36% to $41.3m. Revenue from bundling, which helps tech giants like Netflix and Amazon bundle subscriptions into consumer mobile plans, surged 71% to $14.9m.
Looking ahead, rising inflation is a risk, as this could limit payment volumes growth. This is presumably why the stock has fallen 10% since the end of February.
AI might be another concern. However, as BlackRock Throgmorton Trust (a Boku shareholder) recently said: “As for AI risk, we think Boku is well insulated, considering it is a regulated network operating across multi jurisdictions, with multiple licenses with a deep and broad pool of connections across myriad companies and merchants that is an incredible barrier to entry and hard to replicate.”
Trading at just 19 times forward earnings, I think this under-the-radar growth stock is worth looking into.
