hsbc rally may have been overdone 1358192015

The recent 20% rally in HSBC shares from the March low was extremely strong and one based on some fundamentals but otherwise optimistic and relief style issues.

Much has been made in the press of HSBC’s AGM announcement that it would re-consider its HQ location in London following aggressive corporate taxation and regulatory oversight. This to many saw it open up the door to a move of its headquarters to Hong Kong and received a positive reaction from investors who bet that a move to the financial capital of Asia would see tax savings that could be returned to investors in the forms of greater dividends. It is speculated that moving HQ to Hong Kong could save the banking giant as much as £3bn.

The stock also reacted to press speculation that HSBC could be looking to sell its retail arm, which could be part of a £20bn deal. The firm has to separate its domestic retail banking division by 2019 thanks to a new law and this loss of control is making the HSBC executive board uneasy.

It is also worth mentioning that having rallied strongly on these two factors, the base level from which the 20% rally emanated from was a two and a half year low at 550p.

I think the upward move is overdone, and given the fact that we are now entering the month of May, which can be typically be the start of a short term bearish move in UK stocks as investors minimise portfolios for the summer lull, HSBC shares could now be due a correction. Normally, I would wait until the month of June, which has seen HSBC shares finish the month lower on 8 of the last 9 years for the month. However, the recent bull move higher in the firms shares, I feel there is the potential to make the most of any downward move over the coming two months, and not purely just May.

Key findings:

HSBC shares rose 11.6% in April following 5-monthly declines
Share prices hit resistance levels of 660p
Consolidation channel trend remains of 540p – 660p
Shares have finished lower in June 8 of last 9 years

From time to time, StoneX Financial Pty Ltd (“we”, “our”) website may contain links to other sites and/or resources provided by third parties. These links and/or resources are provided for your information only and we have no control over the contents of those materials, and in no way endorse their content. Any analysis, opinion, commentary or research-based material on our website is for information and educational purposes only and is not, in any circumstances, intended to be an offer, recommendation or solicitation to buy or sell. You should always seek independent advice as to your suitability to speculate in any related markets and your ability to assume the associated risks, if you are at all unsure. No representation or warranty is made, express or implied, that the materials on our website are complete or accurate. We are not under any obligation to update any such material.

As such, we (and/or our associated companies) will not be responsible or liable for any loss or damage incurred by you or any third party arising out of, or in connection with, any use of the information on our website (other than with regards to any duty or liability that we are unable to limit or exclude by law or under the applicable regulatory system) and any such liability is hereby expressly disclaimed.

FOREX.com is a trading name of StoneX Financial Pty Ltd.

The material provided herein is general in nature and does not take into account your objectives, financial situation or needs.

While every care has been taken in preparing this material, we do not provide any representation or warranty (express or implied) with respect to its completeness or accuracy. This is not an invitation or an offer to invest nor is it a recommendation to buy or sell investments.

StoneX recommends you to seek independent financial and legal advice before making any financial investment decision. Trading CFDs and FX on margin carries a higher level of risk, and may not be suitable for all investors. The possibility exists that you could lose more than your initial investment and CFD investors do not own or have any rights to the underlying assets.

It is important you consider our Financial Services Guide and Product Disclosure Statement (PDS) available at www.forex.com/en-au/terms-and-policies/, before deciding to acquire or hold our products. As a part of our market risk management, we may take the opposite side of your trade. Our Target Market Determination (TMD) is also available at www.forex.com/en-au/terms-and-policies/.

StoneX Financial Pty Ltd, Suite 42.01, 264 George Street, Sydney, NSW 2000 (ACN 141 774 727, AFSL 345646) is the CFD issuer and our products are traded off exchange.

Delayed London Stock Exchange (LSE) Data

The London Stock Exchange (LSE) market data displayed or referenced on this website is provided on a delayed basis and is not in real time. The delay period may vary but is typically at least 15 minutes. This data is intended for information purposes only and should not be relied upon for trading, investment, or other financial decisions. We do not guarantee the completeness, reliability, or suitability of the data for any particular purpose. Users should consult real-time data sources and obtain professional advice before making any financial decisions.