After being prevented from paying out a dividend in the wake of the pandemic in March, the return of a payout to shareholders could mark a turnaround in the HSBC share price.
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Dividend drought bombshell for HSBC shares
It was a landmark move by the Bank of England in March as the stock market plunged and it was keen to avoid the kind of cash and credit crunch seen at the time of the Global Financial Crash in 2008, it instructed HSBC to break the habit of more than seven decades by not paying a dividend. Clearly, this was a painful action as far as shareholders were concerned, but of course as we have seen in many instances of late, when it comes to corporate governance and executive pay, shareholders have been proved to be relatively toothless.
Far East COVID-19 rebound supports HSBC share price
Therefore, it was likely that no one would bleat against the Bank of England’s Prudential Regulation Authority (PRA). It is to be the PRA to which HSBC has to lobby successfully to resume dividend payments. Given the better than expected fundamentals, on both charges against COVID-19, and cost savings, this is likely to be a successful campaign. It should be remembered that Asia weighted HSBC has been a big winner on the China / Far East economic rebound from COVID-19, something which contrasts with the second wave nightmare currently panning out in Europe and the US.
Smaller than expected provisions against bad debt
Like its UK banking sector counterpart Barclays, it would appear that a scenario in which bad debt provisions are made as a precautionary measure, are then proved to be overly pessimistic, can actually be better than a scenario where such provisions come out of the blue. In the case of HSBC shares this meant an initial provision of $2bn being reduced to $785m. This lower than expected number is the equivalent of investors climbing a “wall of worry” in terms of the HSBC share price that subsequently did not prove to be there. A further positive is one that was already in the mix ahead of the pandemic: job cuts. The plan at the start of 2020 was to cut 35,000 jobs, or 15% of the workforce. Clearly this cost saving is also going to be significant, further enabling a return to a dividend payout, in particular, the “conservative” one that HSBC has been hinting at.
HSBC share price predictions: rebound from below 300p could lead to 400p
One of the strongest charting patterns is where a stock or market makes a temporary new low after the price action “gaps down” leaving an untraded area, and then “gaps up” inducing a so called Bear Trap. Indeed, not only have bears been caught out, but the formation known as an “Island Reversal”, an event which can lead to an extended recovery for a market. This is what is currently being flagged for HSBC shares, and as a chartist I would be assuming that particularly while above the October low at 292p, a return towards not only the June resistance area near 400p, but the 200 day moving average currently at 407p. However, only sustained price action above the 200 day line would officially change the ongoing technical downtrend in the shares into an uptrend.
How to trade shares with ATFX
Looking to trade HSBC shares and other major company shares? Open a live or demo account with ATFX to get up to speed. Start trading now to benefit from competitive spreads, high-quality trade execution, and no commission.
1. Register for an account or log in to your existing account
2. Open MT4 either on your desktop or mobile
3. Search for HSBC shares in the market watch or symbols window
4. Choose your position size
5. Hit buy or sell, and then confirm the trade
HSBC share price today: daily chart
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