Shares of HSBC Holdings (0005), which draws more than two-thirds of its pretax income from Hong Kong, slumped today after a report said the U.S. is mulling a move to punish banks in the city and destabilize the currency peg to the dollar.
As at 3:23pm, the blue-chip stock tanked 3.75 percent, or HK$1.45, to HK$37.2.
HSBC was specifically mentioned as a potential target, Bloomberg News has reported, citing people familiar with the matter. U.S. Secretary of State Michael Pompeo last month singled out Peter Wong Tung-shun , the bank’s Asia Pacific chief executive, for signing a petition supporting “Beijing’s disastrous decision to destroy Hong Kong’s autonomy.”
A Hong Kong-based spokeswoman declined to comment on the U.S. report.
London-based HSBC is walking a political tightrope in its attempts to further push into the world’s most populous nation. The bank last month endorsed China’s new security law and is now drawing further criticism from politicians in the U.S. and the U.K.
In a statement on its official WeChat account last month, the bank pledged to continue to invest and support the Chinese economy after speculation in local media that its massive restructuring plan would mean an exit from China.
Some top advisers to US President Donald Trump want the U.S. to undermine the Hong Kong dollar’s peg to the U.S. dollar to punish China for recent moves to chip away at Hong Kong’s political freedoms, according to people familiar with the matter. The proposal, however, hasn’t been elevated to the senior levels of the White House, and faces strong opposition from others in the administration who worry such a move would only hurt Hong Kong banks and the U.S., not China, said the people.
The U.S. clearing license is vital to HSBC’s global operations and the bank is one of the largest international lenders operating in America. HSBC recently hired James Forese, a former senior executive at Citigroup Inc. to its board as it looks to revamp its global business including its underperforming U.S. unit.
HSBC is also the largest note-issuing bank in Hong Kong, putting it at more risk than Standard Chartered (2888) and BOC Hong Kong (2388) should the U.S. limit their ability to buy dollars. Standard Chartered fell 2.76 percent, while BOC Hong Kong lost 2.24 percent .-Bloomberg/The Standard