LONDON BRIEFING: HSBC And StanChart Under Pressure Over Fraud, China

(Alliance News) - Shares in HSBC Holdings plunged to a 25-year low in Hong Kong on Monday on ...

Alliance News 21 September, 2020 | 8:08AM
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(Alliance News) - Shares in HSBC Holdings plunged to a 25-year low in Hong Kong on 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, AFP reported.

The bank's stock fell more than 4% to a low of HKD29.60 at one point – 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 include restrictions on trade, investment and visas.

Meanwhile, massive sums of allegedly dirty money have flowed for years through some of the world's largest banking institutions, including HSBC and Standard Chartered, according to an international journalism investigation published Sunday, which denounced shortcomings in sector regulations.

"Profits from deadly drug wars, fortunes embezzled from developing countries, and hard-earned savings stolen in a Ponzi scheme were all allowed to flow into and out of these financial institutions, despite warnings from the banks' own employees," according to the probe from Buzzfeed News and the International Consortium of Investigative Journalists.

The investigation, which was led by 108 international media outlets from 88 different countries, is based on thousands of suspicious activity reports submitted to the US Treasury Department's financial law enforcement agency, FinCEN, by banks from around the world.

The documents relate to USD2 trillion in transactions that circulated between 1999 and 2017. The investigation points in particular to five major banks – London-listed HSBC and Standard Chartered, as well as JPMorgan Chase & Co, Deutsche Bank and Bank of New York Mellon – accused of continuing to move assets of alleged criminals, even after being prosecuted or convicted for financial misconduct.

In London early Monday, HSBC shares were down 3.2% while StanChart's were off 2.5%, amid a broad market decline.

Here is what you need to know at the London market open:

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MARKETS

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FTSE 100: down 1.6% at 5,911.50

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Hang Seng: down 1.5% at 24,079.03

Nikkei 225: Tokyo market closed for holiday.

DJIA: closed down 244.56 points, 0.9%, at 27,657.42

S&P 500: closed down 37.54 points, 1.1%, at 3,319.47

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GBP: up at USD1.2961 (USD1.2949)

EUR: flat at USD1.1860 (USD1.1863)

Gold: down at USD1,951.50 per ounce (USD1,953.70)

Oil (Brent): down at USD42.77 a barrel (USD43.34)

(changes since previous London equities close)

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ECONOMICS AND GENERAL

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Monday's Key Economic Events still to come

Japan Respect for the Aged Day holiday. Financial markets closed.

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Britain stands at a "critical point" in the coronavirus pandemic, Chris Whitty will warn, as he lays the ground for tough new controls in an urgent attempt to halt the surge in infections. In a televised briefing on Monday, the chief medical officer for England will say the country faces a "very challenging winter", with the current trend heading in "the wrong direction". UK Prime Minister Boris Johnson spent the weekend with senior ministers and advisers discussing what action to take as the rise in the number of new cases showed no sign of slowing. It is thought Johnson could announce new measures in a press conference as early as Tuesday. Whitty, who will appear alongside the government's chief scientific adviser Patrick Vallance, will explain how the virus is spreading in the UK and the potential scenarios that could unfold as winter approaches.

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The European Central Bank has launched a review of its pandemic emergency purchase programme, the Financial Times reported. The review will look at the impact of the bond buying scheme launched in March in response to the coronavirus crisis, which was then expanded to EUR1.35 trillion in June, two governing council members told the FT on condition of anonymity. They said important questions for the review would be to consider how long the PEPP should continue, and whether some of its extra flexibility should be transferred to the central bank's longer running asset purchase schemes. "Having that extra flexibility has been very useful," said one council member.

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BROKER RATING CHANGES

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RBC RAISES BURBERRY TO 'SECTOR PERFORM' ('UNDERPERFORM') - TARGET 1620 (1450) PENCE

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MORGAN STANLEY RAISES JD WETHERSPOON TO 'EQUAL-WEIGHT' ('UNDERWEIGHT') TARGET 940 (1,390) PENCE

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COMPANIES - FTSE 100

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Informa swung to an interim loss but said it is seeing a recovery in its events business in China. The business information publisher and events organiser reported revenue of GBP814.4 million for the first half of 2020, down 42% from GBP1.41 billion a year ago. Informa posted a pretax loss of GBP801.2 million, swinging from a profit of GBP232.8 million. Chief Executive Stephen Carter said: "Despite the first-half disruption to physical Events businesses caused by the pandemic, we are seeing strong demand and resilience in our specialist Subscriptions, Data and Content, reflecting the power of our brands and depth of geographic reach and customer relationships. Encouragingly, we have also seen our physical Events business recover in mainland China." Full-year revenue is now expected to be around GBP1.7 billion, which would be down 41% from GBP2.89 billion in 2019. Informa said it has moved to the "next stage" of its Covid-19 action plan, which includes the delivery of over GBP600 million in cost savings to adjusted operating profit in 2020, with direct savings of around GBP400 million and more than GBP200 million annualised indirect savings by year-end.

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AstraZeneca reported positive updates for its Tagrisso and Lynparza treatments. On Tagrisso, results from a prespecified exploratory analysis of the Adaura phase three trial showed AstraZeneca's drug demonstrated a clinically meaningful improvement in central nervous system disease-free survival in treating lung cancer. Central nervous system recurrence, when cancer spreads to the brain, is a frequent complication of epidermal growth factor receptor-mutated non-small cell lung cancer. Tagrisso reduced the risk of disease recurrence in the brain by 82%, AstraZeneca said. Meanwhile, the company said Lynparza has been recommended for marketing authorisation in the EU for the 1st-line maintenance treatment with bevacizumab of patients with homologous recombination deficient-positive advanced ovarian cancer. The same drug also has been recommended for EU authorisation for patients with metastatic castration-resistant prostate cancer.

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DCC said it has expanded its liquefied petroleum gas business in the US and the Netherlands. For the US, DCC has bought NES Group, which markets, sells and delivers propane and other related products and services to customers in Connecticut, Rhode Island and Massachusetts. DCC LPG now has operations across 14 states in the US and is well positioned to continue to grow, the FTSE 100 firm said. In the Netherlands, DCC LPG has agreed to buy Primagaz from SHV Energy, subject to competition authority approval. The business is "highly complementary" to DCC LPG's existing business in the Benelux region. No financial details from either deal were given.

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Restrictions on UK-US travel will cost the UK economy at least GBP11 billion this year, according to a report commissioned by leading aviation industry firms. Some GBP32 million will be wiped from UK GDP each day from next month if constraints aimed at tackling the coronavirus pandemic remain in place, the study suggests. The analysis found that the total capacity of flights planned between the UK and the US this month is around 85% down on September 2019. Airline trade body Airlines UK, British Airways' owner International Consolidated Airlines Group, Heathrow Airport and aviation services company Collinson commissioned consultancy York Aviation to carry out the research. People arriving in the UK from the US are required to self-isolate for 14 days, while the US will not allow foreigners to enter if they have been in the UK during the previous 14 days.

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COMPANIES - MAIN MARKET AND AIM

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Superdry reported a fall in revenue and a deeper annual loss as Covid-19 hit its performance. Revenue for the financial year that ended April 25 fell 19% to GBP704.4 million, with the firm's pretax loss deepening to GBP166.9 million from GBP89.3 million. The sales fall reflected a planned move away from "persistent discounting", and also the hit from Covid-19 in the fourth quarter, with its entire store estate closed from March 22 to the financial year-end. Current trading continues to be disrupted, the firm noted, but has improved from the end of the financial year. Superdry said 95% of its store estate and 98% of franchises now have re-opened since lockdown. "While our underlying profit has been impacted by trading performance during the year, including Covid-19 related store closures, I am particularly pleased by how strongly e-commerce has performed, with FY21 first quarter revenues nearly doubling year-on-year. This has been complemented by our increased digital consumer engagement, which helped drive a stronger womenswear mix than we have ever seen before," said Julian Dunkerton, founder & chief executive.

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COMPANIES - GLOBAL

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A US judge on Sunday blocked the government's ban on WeChat downloads, hours before it was due to take effect in an ongoing technology and espionage battle between Washington and Beijing. The Trump administration had ordered a ban on downloads of the messaging platform WeChat as well as hugely popular video-sharing app TikTok, both owned by Chinese companies. Both bans have now been suspended. A California court ruling said it granted a "motion for a nationwide injunction against the implementation" of the government order on WeChat, with the judge citing concerns over free speech. The order would have slowed WeChat down and made it unusable in the US for video chats with family and friends, according to experts. Owned by Chinese technology firm Tencent Holdings, WeChat has around 19 million active daily users in the US.

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Monday's Shareholder Meetings

finnCap Group

Induction Healthcare Group

Henderson Smaller Cos Investment Trust

Savannah Energy

Knights Group Holdings

IG Design Group

Unilever

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By Tom Waite; thomaslwaite@alliancenews.com

Copyright 2020 Alliance News Limited. All Rights Reserved.

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Securities Mentioned in Article

Security Name Price Change (%) Morningstar
Rating
Wetherspoon (J D) PLC 923.50 GBX 6.15 -
Standard Chartered PLC 399.40 GBX 4.20
HSBC Holdings PLC 321.40 GBX 4.71
Burberry Group PLC 1,488.00 GBX 0.34

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