The HSBC share price plummeted in Hong Kong after the company reported weaker-than-expected results and announced a $3 billion share buyback. It was trading at $97.50 on Tuesday, a few points below the year-to-date high of $102p. It has crashed to the lowest point since July 21.
HSBC share buyback and earnings
The HSBC stock price plummeted after the company published weaker-than-expected financial results. In a report, the company said that the profit before tax came in at $6.3 billion in the second quarter, lower than the expected $6.99 billion.
HSBC’s revenue came in at $16.5 billion in the second quarter, lower than the median estimate of $16.67 billion. This performance happened after the company recorded a $2.1 billion impairment charge linked to its Bank of Communications.
HSBC’s profit before tax plunged by $5.7 billion in the year’s first half. It blamed this crash to its BoCom impairment and the adverse impact of the $3.6 billion net gain related to its exit of the Canadian operations. HSBC also blamed the ongoing trade war, with the CEO noting:
“While we would expect the direct impact from tariffs to have a relatively modest impact on our revenue, the broader macroeconomic deterioration may see RoTE excluding notable items fall outside of our mid-teens targeted range in future years.”
More data released today, July 30, were weaker-than-expected. For example, the return on tangible equity (RoTE) was 14.7%, much lower than the previous 21.4%.
One of the few positive aspects of the report was that HSBC will continue to reduce its outstanding shares by implementing a $3 billion share buyback. Data shows that the outstanding shares have been falling in the past few years, moving from over 20 billion in Hong Kong to 17.71 billion today.
However, the $3 billion buyback was in line with expectations, as we wrote here. This is one of the top reasons why the stock pulled back after its buyback announcement.
The other notable news was that the company’s wealth management business continued doing well. Its fee and other income jumped by 22%, helped by its insurance, investment distribution, and private banking businesses. This business will continue to offset the others as interest rates fall.
HSBC share price analysis
The daily chart shows that the HSBC stock price retreated from the year-to-date high of $102.3 to $97.50 today. It has tumbled to the lowest level since July 21.
This decline happened after the stock formed a rising wedge pattern, which comprises of two ascending and converging trendlines. This is one of the most bearish patterns in technical analysis.
The Relative Strength Index (RSI) was also in the overbought level, while the two lines of the MACD have formed a bearish crossover pattern.
Therefore, the HSBC share price will likely continue falling to the 50-day moving average at $95 and then resume the uptrend.
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