I’m following Standard Chartered due to these two developments 

Jay Yao writes discusses the two developments that mean he’s considering Standard Chartered as a possible addition to his portfolio.

| 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.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Standard Chartered (LSE: STAN) shares haven’t done well in 2020. Shares of the bank have fallen substantially as low interest rates, Covid-19, and geopolitical tensions have hurt the business. 

Year to date, the shares are down over 40%. Making matters worse, the bank suspended its dividend earlier in the year, a blow for many investors who were seeking stable income.

While the shares haven’t done well, I think there are several reasons I could consider the bank as an investment option going forward.

China’s economy is growing

I’m following Standard Chartered because it has exposure to China’s economic growth. 

Although it’s already a huge economy, the IMF says China’s economy is expected to grow to around 8.2% in 2021 and 5.8% in 2022. Analysts expect the country to account for as much as 26.8% of total global growth in 2021 and 27.7% in 2025. 

Standard Chartered has substantial exposure to Greater China. Hong Kong accounted for around a quarter of the bank’s income last year. In the same period, mainland China accounted for around 5.6%.

Although mainland China doesn’t account for as much as Hong Kong, the entire region is interconnected. If China’s economy does better than expected, I think Hong Kong’s economy could do likewise.

In addition to deriving indirect exposure to Mainland China growth through Hong Kong, Standard Chartered also has opportunities in the future due to China’s government opening up its financial sector further. The bank also has expansion opportunities in terms of the Greater Bay Area growth and the Belt & Road initiatives.  

As the Chinese economy continues to grow, I think Standard Chartered has an opportunity to grow earnings in the country. 

Pfizer vaccine: good for Standard Chartered?

The recent Pfizer and Moderna vaccine news is another reason I’m following Standard Chartered.

Recently, Pfizer in conjunction with its partner BioNTech, released bullish data concerning a Covid-19 vaccine candidate from a late-stage trial. According to the data, the vaccine is more than 90% effective. And what we know so far suggests no serious safety issues either. Meanwhile, Moderna’s vaccine yesterday was claimed to be almost 95% effective.

Given that expectations for the efficacy of any vaccine weren’t very high before the Pfizer news, many sectors rallied on the news last week. And they continued to do so after Moderna’s announcement. 

I think the news is good news for Standard Chartered. If the world returns to ‘business as usual’ faster than expected, the bank’s earnings could recover faster as well. 

I also think effective vaccines would increase the probability that Standard Chartered decides to reinstate its dividend next year. 

Many investors previously bought the bank for its dividend. Now, I reckon any hint of the dividend returning could improve sentiment around the stock.  

With vaccine news and the bank’s low price-to-book ratio of around 0.4, I’d consider buying the stock and holding for the long term. 

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 assessed. Consider taking independent financial advice.

Jay Yao has no position in any of the shares mentioned. The Motley Fool UK has recommended Standard Chartered. 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

Investing Articles

Are these the best stocks to buy on the FTSE right now?

With the UK stock market on the way to hitting new highs, this Fool is considering which are the best…

Read more »

Petrochemical engineer working at night with digital tablet inside oil and gas refinery plant
Investing Articles

Can the Centrica dividend keep on growing?

Christopher Ruane considers some positive factors that might see continued growth in the Centrica dividend -- as well as some…

Read more »

Smiling family of four enjoying breakfast at sunrise while camping
Investing Articles

How I’d turn my £12,000 of savings into passive income of £1,275 a month

This Fool is considering a strategy that he believes can help him achieve a stable passive income stream with a…

Read more »

Person holding magnifying glass over important document, reading the small print
Investing Articles

2 top FTSE 250 investment trusts trading at attractive discounts!

This pair of discounted FTSE 250 trusts appear to be on sale right now. Here's why I'd scoop up their…

Read more »

Smiling young man sitting in cafe and checking messages, with his laptop in front of him.
Investing Articles

3 things that could push the Lloyds share price to 60p and beyond

The Lloyds share price has broken through 50p. Next step 60p? And then what? Here are some thoughts on what…

Read more »

Young female business analyst looking at a graph chart while working from home
Investing Articles

£1,000 in Rolls-Royce shares a year ago would be worth this much now

Rolls-Royce shares have posted one of the best stock market gains of the past 12 months. But what might the…

Read more »

Investing Articles

Are HSBC shares a FTSE bargain? Here’s what the charts say!

There are plenty of dirt-cheap FTSE 100 banking stocks for investors to choose from today. Our writer Royston Wild believes…

Read more »

Three signposts pointing in different directions, with 'Buy' 'Sell' and 'Hold' on
Investing Articles

Just released: Share Advisor’s latest ‘Hold’ recommendation [PREMIUM PICKS]

In our Share Advisor newsletter service, we provide buy, sell, and hold guidance for our universe of recommendations.

Read more »