The Motley Fool

HSBC share price: can it bounce back?

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.

Image source: Getty Images.

HSBC (LSE: HSBA) has had its share of challenges in the recent past. Geo-political stress in its important Asian market, and its own restructuring. As a result, the HSBC share price was falling even before 2020 happened. Most recently of course, there is Covid-19. 

But can it bounce back now? 

5G is here – and shares of this ‘sleeping giant’ could be a great way for you to potentially profit!

According to one leading industry firm, the 5G boom could create a global industry worth US$12.3 TRILLION out of thin air…

And if you click here we’ll show you something that could be key to unlocking 5G’s full potential...

Positives for the HSBC share price

I think there are at least four reasons to be hopeful about the HSBC share price. 

#1. Improved investor sentiment: the stock market rally that started in November pushed up share prices across segments, including banks. HSBC’s share price, too, benefited from it. It’s still much lower than its pre-market crash levels. But it’s almost 1.5 times higher than the lows of October too.

#2. Dividends restarted: HSBC cancelled dividends early last year as a precautionary measure. But along with its annual results release today, it has restarted dividends. Based on my estimates of its 2020 dividend, the dividend yield is 3.7%, which isn’t bad. Further, in its earnings release, the bank says that it will provide “sustainable dividends” going forward. These will be between 40% and 55% of reported earnings per share. 

To me this translates into a confirmation that it will continue to pay dividends, even if the amount varies. As a long-term investor, I see some attractiveness to this dividend policy. 

#3. Positive outlook: the bank is “cautiously optimistic” about 2021 and it says that it has had a good start to the year in its earnings release. This can be a positive for the HSBC share price this year. 

#4. Focus Asia: HSBC’s results are muted but they do show clearly why the bank’s optimistic. The Asian market is responsible for its pre-tax profits, while its Europe business is making losses and the rest are way too small to really make a difference. Asian growth is expected to be back in 2021 as China continues to race ahead. This could bode well for the bank. 

Risks to the share

However, the risks to the HSBC share price are big too. I see at least two big ones right now. 

#1. Slowly receding pandemic: while I’m encouraged by the bank’s outlook, we can’t overlook the fact that Covid-19 will still take time to recede. In the UK, the lockdown will be over only six months into 2021. The pandemic’s real economic impact will be clear only after that. Increased bad debts and low demand for loans are possibilities that will affect the bank and also the HSBC share price. 

#2. Geo-politics still at play: while some of its other global economy related concerns have lessened significantly, I think it’s still important to watch out for developments in Hong Kong, where tensions with China could bubble up again. The HSBC share price has been impacted by this in recent years, and could be sensitive to it in the future too. 

The upshot

On balance, I think the winds are turning in favour of the HSBC share price, but I’m still somewhat cautious about buying banking stocks in general because of continued economic uncertainty. I cautious about HSBC in particular because of the continued Hong Kong-China situation. 

“This Stock Could Be Like Buying Amazon in 1997”

I'm sure you'll agree that's quite the statement from Motley Fool Co-Founder Tom Gardner.

But since our US analyst team first recommended shares in this unique tech stock back in 2016, the value has soared.

What's more, we firmly believe there's still plenty of upside in its future. In fact, even throughout the current coronavirus crisis, its performance has been beating Wall St expectations.

And right now, we're giving you a chance to discover exactly what has got our analysts all fired up about this niche industry phenomenon, in our FREE special report, A Top US Share From The Motley Fool.

Click here to claim your copy now — and we’ll tell you the name of this Top US Share… free of charge!

Manika Premsingh has no position in any of the 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.

Our 6 'Best Buys Now' Shares

Renowned stock-picker Mark Rogers and his analyst team at The Motley Fool UK have named 6 shares that they believe UK investors should consider buying NOW.

So if you’re looking for more stock ideas to try and best position your portfolio today, then it might be a good day for you. Because we're offering a full 33% off your first year of membership to our flagship share-tipping service, backed by our 'no quibbles' 30-day subscription fee refund guarantee.

Simply click below to discover how you can take advantage of this.