For Singapore investors, the big three bank stocks in Singapore are reliable. They provide a number of advantages to those looking for investment returns.
They pay dividends. They’re stable. They benefit from rising interest rates. So, naturally, investors are looking at other big Asian banks in the region.
Recently, one popular choice that’s been mentioned is Hong Kong banking behemoth HSBC Holdings plc (SEHK: 5). It’s big, pays dividends and has a sizeable presence in both Asia and Europe.
Surely, then, it would stand to benefit from rising interest rates just like the local Singapore banks. There might be some truth in that.
But HSBC also has many deeply-entrenched issues that make it one banking stock investors need to avoid. Here’s why.
Recently, HSBC has made the headlines. That’s because its largest shareholder – Ping An Insurance Group Co of China Ltd (SEHK: 2318) – has called for the banking giant to be broken into two.
This would see its Hong Kong and Asian operations – its major profit centre – break away from the European and global business.
Ping An sees a breakup of HSBC releasing US$8 billion of capital and creating between US$25-35 billion in additional market value.
Besides the business reasons for proposing this split (Asia contributed nearly 70% of HSBC’s H1 2022 profit), the bank has been buffeted by geopolitical headwinds.
As a bank with colonial roots in Hong Kong, it has been a target of criticism from both UK Members of Parliament (MPs) and the Chinese Communist Party (CCP) in recent years as geopolitical tensions rise.
Tim, based in Singapore but from Hong Kong, caught the investing bug as a teenager and is a passionate advocate of responsible long-term investing as a great way to build wealth.
He has worked in various content roles at Schroders and the Motley Fool, with a focus on Asian stocks, but believes in buying great businesses – wherever they may be. He is also a certified SGX Academy Trainer.
In his spare time, Tim enjoys running after his two young sons, playing football and practicing yoga.