HSBC share price is up by more than 6% in London, becoming the best-performing stock in the FTSE 100 index. The FTSE 100 itself is up by more than 2% while other banks like Standard Chartered, RBS, and Lloyds are up by more than 5.56%, 4%, and 3% respectively. HSBC stock price is trading at 406p.
Why is HSBC share price rallying?
HSBC stock price is rising as traders digest two divergent news today. On the one hand, there is a dire warning from the Federal Reserve. According to the Financial Times, the Fed is worried that HSBC and Santander will have the biggest loss rates in the US across consumer lending and credit cards.
Similarly, the Fed expects Barclays and Credit Suisse to post huge losses in the commercial and real estate loans. At the same time, the stress test shows that Deutsche Bank will have a faster cash burn than all 32 institutions in the US.
European banks have always struggled in the United States. In early 1990s, the banks saw significant growth in the country. This ended in the last financial crisis, when most banks decided to scale down operations there.
According to the Fed, HSBC, the giant bank with main operations in the UK and China, will have losses equal to 26.4% of their total loan balance this year. That is the highest of all banks that were put into the test this year.
The Fed is not the only institution worried about HSBC. In a statement last week, S&P said that HSBC potential losses was significantly higher than other banks. That is because the bank, together with Santander lend to people with a lower credit score.
HSBC stock price rises as it invests more in China
The likely reason why HSBC share price is rising is because of its recent investments in China. According to Nikkei, the bank is hiring at least 100 new wealth advisors in China and setting a fintech venture fund there.
The announcement comes as the bank faces criticism for its support of the controversial national security law. It also comes after the bank clarified that it was still committed to Chinese economy after rumours that it was considering leaving.
By boosting its wealth management business, HSBC is aiming to take market share in a country that is generating a lot of wealthy people. Other global banking groups like Nomura and Credit Suisse have been investing a lot in this division in China.
HSBC share price analysis
HSBC share price us trading at 406p. On the daily chart, this price is important because the shares have just moved above the 50-day exponential moving average. It has also formed a gap and moved above the descending trend line that is shown in black. More so, it is at the highest it has been since June 10.
Therefore, the price is likely to continue rallying as bulls target the next resistance at 436p (100-day EMA). On the flip side, a move below 400p will invalidate this trend.