HSBC Shares Sink To 25-Year Low After China Reports It Under The ‘Unreliable List’ Category For Alleged Fraudulent Activity

HSBC shares
The logo for HSBC Holdings Plc is displayed on the bank's headquarters building in Hong Kong. Photographer: Anthony Kwan/Bloomberg

HSBC shares suffered a historic plunge on Monday after new fears rose in the horizon regarding its business in China and a report which accuses the banking giant to stop fraudulent activity and money laundering schemes.

The recent hit in HSBC shares will become a potential threat to the London-based bank’s China expansion ideas, reports suggest. The historic low is happening after over a decade. HSBC shares in Hong Kong had earlier slid down to a terrible low in 2009. However, 2020 HSBC shares fall even below that, closing at HK$29.30. This is the lowest since 1995. The pain continues as the banking giant also had to face a 6.2% trading down in London as of 11:02 a.m. which is another multi-decade fall.

The dip in HSBC shares come in the middle of a global pandemic when the world is battling a global recession, US-China tensions, rapidly declining profits and so on.

But bad news keeps flowing in for HSBC as it becomes a possible candidate to make into the ‘unreliable list’ of China.

HSBC-China Tensions

The London-based bank, which is also Europe’s largest, is under serious threat as China suggests HSBC’s possible inclusion in it’s “unreliable entry list”. On Saturday, China’s Commerce Ministry laid some grounds on how this floating news might pan out. Banks placed under the “unreliable entry list” will be restricted from investing in China. This is in regard to China’s national security, reports Chinese state-run newspaper Global Times, on Saturday. After the historic plunge in HSBC shares, it was also mentioned by the International Consortium of Investigative Journalists (ICIJ). The report stated that HSBC was under the category of lenders that profited from dangerous and powerful players in the last 20 years despite penalty regulations in place.

HSBC Shares Dip For Political Turmoil Between East And West?

HSBC shares

HSBC is currently in a serious turmoil as the global bank has invested a lot in China over the years. Now, it stands at the juncture where it might not be allowed to invest or expand its mainland business in its biggest market.

The ICIJ has received around 2100 “suspicious activity” reports from 1999 to 2017 transactions. In a statement ON Monday, HSBC responds to this stating that it started its journey in 2012 and can claim to be a “much safer institution” than it was before.

HSBC shares are caught up between the political turmoil between China and the West. Its stock has plunged steeper than its biggest rivals like JPMorgan Chase & Co. and Citigroup Inc. that fall to 29% and 44% respectively.

It is also believed that HSBC might have triggered anger in its biggest market, Hong Kong, earlier in 2020 after reducing its dividend in the midst of the global pandemic. This move had alienated some of its loyal investors resulting in a historic low in HSBC shares.