Shares of banking giant HSBC plunged to a 25-year low on Monday over fears of being added to a Chinese list of companies deemed a threat to national security and after being accused of letting fraudulent activity go unpunished.
The distressed lender has fallen more than four percent to HK $ 29.60 at one point – a level not seen since mid-1995 – as investors worry about its ability to continue doing business in China and Hong Kong, which are a crucial part of its growth.
The sale came after the Global Times, an English state-run tabloid in China, announced that the bank could be one of the first companies to be named to Beijing’s “unreliable entity list” in the part of a stand-for-tat- with several western countries.
The report highlighted HSBC’s involvement in Washington’s investigation of Huawei and the arrest of its chief financial officer Meng Wanzhou in Canada.
Among the sanctions that can be imposed are restrictions on trade, investment and visas.
“If the company is listed as an unreliable company by China, which seems certain since this is a Global Times article, the bank will face many difficulties in doing business in China,” he said. told Bloomberg Banny Lam of CEB International Investment Corp. News.
“They may find it difficult to develop their activities on the continent, having invested so much there in recent years.”
On Sunday, HSBC was among a group of banks that allegedly allowed fraudsters to transfer millions of dollars around the world even after learning of the scam.
The International Consortium of Investigative Journalists cited leaked official US documents that the bank “continued to take advantage of powerful and dangerous players” over the past two decades.
HSBC told the investigation team that it has always fulfilled its legal obligations when it comes to reporting suspicious activity.
Shares of another Hong Kong-listed bank, Standard Chartered, also fell nearly 4% after being mentioned in the report.
HSBC has seen its share price fall by more than half so far this year, hit by the pandemic – net profit has fallen 69% in the first six months – and Sino-US tensions.
The lender acts as a major trade intermediary between China and the West, but this has left it more vulnerable than most to the crossfire of the increasingly belligerent relationship between the superpowers.
The bank has tried to stay in Beijing’s good graces, vocally supporting Hong Kong’s national security law, drawing criticism in Washington and London.
Analysts saw it as an attempt to protect its access to China, which has already punished companies that disobey Beijing’s line. But that did not protect him from Beijing’s wrath.
“The current tensions between China and the United States inevitably create difficult situations for an organization with HSBC’s imprint,” HSBC chief executive Noel Quinn said last month.
“However, the need for a bank capable of connecting the economies of the East and the West is crying, and we are well placed to fulfill this role,” he added.