I’ve been feeling a little smug about my HSBC (LSE: HSBA) shares lately. I thought I’d nabbed them at exactly the right time.
On 5 May, the China-focused FTSE 100 bank published its Q1 results, and the market response was severe. HSBC shares dropped 5.2% that morning. I’d been waiting for a buying opportunity for ages, and seized the day.
By the end of the month, I was already up 8% on my quickfire trade. As with every stock I buy, I’m planning to hold HSBC for years and ideally decades. It’s always nice to get off to a strong start, though. Now, suddenly I’m back to square one. What went wrong?
Why did the FTSE 100 stock slip?
On Thursday (4 June), I logged onto my online SIPP to find the HSBC share price had slipped 4%. Yet my other FTSE 100 bank holdings, Lloyds and NatWest, held firm. What was going on?
It turned out that Beijing was cracking down on capital outflows, which hit $807bn last year. The news hit shares in two other Asia-focused FTSE 100 financials – Standard Chartered and insurer Prudential. All three were hoping to benefit from rising demand for financial products among China’s expanding middle class. Now it won’t be so easy.
One of the reasons I baulked at buying HSBC shares five years ago was that I feared US-China tensions could crush management between a rock in Washington and hard place in Beijing. The board got round this by dividing operations into two, and the shares cracked on. But as we’ve just seen, there are still risks to doing business in China, along with the massive potential rewards. So what happens now?
Should I buy more HSBC shares?
Long-term investors have still done wonderfully well out of HSBC shares. They’re up a staggering 225% over five years, and 55% over the last 12 months. All dividends are on top.
As a result, they’re more expensive than they were, with a price-to-earnings ratio of 15.2. The trailing dividend yield has slipped to 4.1%. Which explains why I was so happy to get in at a discount. But I’m not kidding myself. After such a strong run, the share price may get choppier from here. Maintaining the pace of recent profit growth won’t be easy. HSBC has set itself a high benchmark.
- 2025 – $29.9bn
- 2024 – $£2.3bn
- 2023 – $30.3bn
- 2022 – $17.1bn
- 2021 – $18.9bn
Profits did fall in 2025, although that was mostly due to $4.9bn of notable items, such as restructuring, legal provisions, and asset sales. HSBC has also been running generous share buybacks, although they’re on hold for now. I’m looking forward to their resumption.
Thursday’s news is a blow, although I suspect the Chinese may find a workaround. But I still think HSBC shares look incredibly tempting today, with a long-term view. The Twelfth Magpie writers are banned from buying shares within two full trading days of writing about them. Once those days have passed, I will consider taking advantage of this dip too, and buying more HSBC shares.
Should you invest £5,000 in HSBC Holdings right now?
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Harvey Jones owns shares in HSBC, Lloyds, and NatWest.
