Shares Of Banking Giant HSBC Plunge Amid Fears Of Chinese De-listing

A women (R) uses a HSBC automated teller machine (ATM) in Hong Kong on September 21, 2020. ISAAC LAWRENCE / AFP
A women (R) uses a HSBC automated teller machine (ATM) in Hong Kong on September 21, 2020. ISAAC LAWRENCE / AFP

Shares in banking giant HSBC plunged to a 25-year low Monday on fears it could be added to a Chinese list of firms deemed a threat to national security and following news it had been accused of allowing fraudulent activity to go unpunished.

The troubled lender tanked 5.33 percent to close at HK$29.30 — a level not seen since mid-1995 — as investors fret over its ability to continue doing business in China and Hong Kong, which make up a crucial portion of its growth.

The sell-off came after the Global Times, a state-run English tabloid in China, reported the bank could be one of the first firms to be named on Beijing’s “unreliable entity list” as part of a tit-for-tat stand-off with several western countries.

The report pointed to HSBC’s participation in Washington’s investigation of Huawei and the arrest of its chief financial officer Meng Wanzhou in Canada.

Among penalties that can be meted out are restrictions on trade, investment and visas.

“If the company is listed as an unreliable company by China, which looks certain since it’s a Global Times article, the bank will be facing lots of difficulties to do business in China,” Banny Lam, at CEB International Investment Corp., told Bloomberg News.

“They may have trouble expanding the mainland business, after investing so much there over the past few years.”

HSBC was also among a group of banks said to have allowed fraudsters to transfer millions of dollars around the world even after it had learned of the scam.

The International Consortium of Investigative Journalists (ICIJ) cited leaked official US documents that said the bank “kept profiting from powerful and dangerous players” in the past two decades.

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HSBC told the investigation team that it has always met its legal duties on reporting suspicious activities.

More vulnerable

In a statement, it said the ICIJ report was “historical and predates the conclusion of our Deferred Prosecution Agreement (DPA) in 2017”.

It added that it had been overhauling its ability to combat financial crime across more than 60 jurisdictions since 2012 and Britain’s Justice Department determined the bank met all its obligations under the DPA.

A Chinese bank employee counts 100-yuan notes and US dollar bills at a bank counter in Nantong in China’s eastern Jiangsu province on August 6, 2019.

“HSBC is a much safer institution than it was in 2012,” the bank said.

Shares in another Hong Kong-listed bank, Standard Chartered, also tumbled more than six percent after it was mentioned in the report.

HSBC has seen its share price more than halve so far this year, hit by the pandemic — net profit slumped 69 percent in the first six months — and China-US tensions.

The lender acts as a major business conduit between China and the West but that has left it more vulnerable than most to the crossfire of the increasingly bellicose relationship between the superpowers.

The bank has tried to stay in Beijing’s good graces, vocally backing Hong Kong’s national security law, sparking criticism in Washington and London.

Analysts saw it as an attempt to protect its access to China, which has a track record of punishing businesses that do not toe Beijing’s line. But that has not shielded it from Beijing’s wrath.

“Current tensions between China and the US inevitably create challenging situations for an organisation with HSBC’s footprint,” HSBC Chief executive Noel Quinn said last month.

“However, the need for a bank capable of bridging the economies of East and West is acute, and we are well placed to fulfil this role,” he added.

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