HSBC something wrong?

There are news about HSBC everyday and today, it is the injunction prohibiting Wallace from joining Citigroup. This is good news to the bank but the other side reveals certain problems with retaining senior persons. It was just a few months ago that Michael Smith left the bank and ever since, the stock price of HSBC has been falling. It touches HKD129 today, I think. Someone asks me: are there anything wrong with the bank? I shake my head and my answer is nobody knows. I still like HSBC and hold its shares but let's look at what has happened recently:

The stock price has been falling and this has disappointed many investors. For loyal shareholders like me, we have to admit that we are big losers when compared with those holding H shares.

I believe there are always problems with retaining senior persons in any large financial institution. But HSBC's senior persons seems to be rapidly changing, going in and out and not without rumors, gossips, and headlines.

The media has not been kind to them. A couple of years ago, a dispute between a senior manager and her dancing coach was widely reported in local papers, magazines and TV. I don't know whether the reports were true but I recall it was reported that the senior manager could spend most of her free time dancing. Well, I hope I can do that when I become senior manager in HSBC.

Just a few months ago when Michael Smith was leaving, I heard another senior person expressing his view in Cantonese in a local TV interview that when we look at the HK economy, we should not stick to the "One Country Two Systems" policy in the Basic Law. There must be something wrong with my ears. But that sounds like dumping an atomic bomb on us. The Central Government in Beijing is always upholding such policy; it is the cardinal rule of the Basic Law. Can you imagine a senior person in HSBC making a public statement to the contrary? I think that TV interview must not be released since many people might get the wrong impression, though certainly not intended by the participants.

Then a few days later, I got another news that HSBC was not going to give new customers bank passbooks anymore. This really hurts because I like to keep such books and I don't see why the bank should take away my right to choose to get a passbook. Fortunately, I am no new customer but if I am a new customer, I will not choose to use HSBC if they are not issuing passbooks to me. True you don't really need a passbook nowadays but I must retain the right to choose to have one. Well, the bank can bill me for getting one but must not abolish my right or freedom to get one. Such action is consistent with the view that we should not stick to the "One Country Two Systems" in HK.

We hear news good or bad about how the subprime problems are hitting HSBC and others. SIV, bail out, writedowns, level 3 asset accounting, .... I must say as a private investor, I am absolutely fed up! What we need is some clear, frank and full release of how bad the problems are in US and how they will affect us elsewhere. But what we hear are a bunch of jargons, SIV, subprime, ... and figures in billions and billions. How could I tell how bad such problems will hurt the bank's earnings and prospects? How could I tell how they will affect the value of the bank's assets, stock price, financial ratios? Have you got any plain and straightforward answers to such questions? If you have, please let me know.

What is more worrying is the news that the bank will concentrate on expanding its business in the emerging markets including Mainland China... And the bank has been making a series of acquisitions in those markets. Good moves! Very encouraging! But didn't the bank say that it must strive for organic growth? Moreover, do you know that there are risks or high risks in such expansion? The Central Government is putting the Chinese economy under macro control, trying to curb excessive lending and investments, cool down the hot stock and property markets. Sure the risks of expanding against this background must not be underestimated. But the news sounds like the bank's only hope is to continue business in emerging markets and growth must rely on such direction. When I think more about such expansion, I start to shiver. What if another mistake like the US subprime crisis occurs in the bank's business in the emerging markets (especially Mainland China)? How can the bank compete successfully with other big banks inside China? More and more questions come up in my mind and as a private investor, I can't stop worrying about the value of my shares in HSBC.

The Dow is up 260 points now. I think the rally can be sustained but I might sell my shares in HSBC on rebound. Someone will buyback after they have dropped to HK$120, I hope.