HSBC Holdings P L C (HSBC)

A proxy on China. This is an opportunity. Feels China is going to revamp their services business. This company is in a prime position to take advantage of opportunities that arise out of China.

A global bank and really well positioned in emerging markets. The problem is that emerging markets are not doing well. When they turn, he thinks this company will turn. Thinks the dividend is secure unless they get into some regulatory issues. A problem he worries with on banks outside of the US. Fairly attractive dividend at about 6%. They may have to cut in the short term, but overall he thinks this is a reasonable investment.

Has not been a great stock to own. Great yield. He keeps waiting for the Chinese growth to show, but China has had a rough year. More than half their sales come out of Asia. Thinks this is an entry point, but is getting somewhat impatient with these big international banks because they are slow to turn. This one has had a combination of being in Europe, which appears to be turning, and of being in China, which rolled over last year.

It is down somewhat, but he likes the long term outlook including their exposure to Asia and Europe. When rates start to go up, they will be a beneficiary.

This is a conundrum. It should be doing better. Very good management. Has a really good franchise in China, and he thinks that is what has really hurt the stock in the short term. Doesn’t expect to see the stock perform extremely well in the near term. However, it has a dividend that is very secure and yielding over 5%. A pretty safe place to park your money.

Should be seeing a bit of a tail wind that we have been seeing financials getting from February onward. On the positive side we are seeing higher lows. Would like to see it get above $45.80 moving to the next cluster around $48.00. Probably better names out there like, J.P. Morgan, CitiGroup, or Bank of America.

In the last 6 weeks or so, this bank has announced pretty significant restructuring, significant cost cuttings and are going to cut their way in order to get some kind of earnings growth. Have had many operational and regulatory challenges. Prefers Toronto Dominion (TD-T) which still has the opportunity to grow. This one is growth constrained, and potentially has some regulatory issues if they try to relocate their headquarters from London back to Hong Kong.

Last year Europe was not too hot and China was undergoing its metamorphosis. China has now caught up and money is flowing into this. It is situated in a growth area of the world. Spinning out the UK retail franchise and moving head office could be catalysts.

Technical target hasn’t changed much. It is still calling for a bit lower level at around $32. However, it has registered some positive action as it has broken out. That could be positive in 2 ways. It could be a break away gap, or it could be an exhaustion gap. If you own, you could put a stop loss at around $48 on the basis that it could go back to test the lower level at around $41. He would wait for it to prove itself one way or another or buy it a bit lower.

The government assets of Lloyds Bank are going to be sold down in 2016, and that is going to be the start of the cycle, and is what happened in the US. Rate rises are going to have to start first in the US, and then they will translate into rate rises in the UK. 20% of their earnings come out of Hong Kong in Hong Kong is pegged to the US$. The big catalyst will be increasing interest rates over time. This is a 3-5 year story. If the stock moves downwards, you are going to get a decent dividend here, so he would be a buyer at these levels.

This is the one successful European bank that did not get bailed out by the government. Was very profitable because it had exposure in China and the rest of Asia. Have had a problem with not reporting on tax with their Swiss private bank. Banking is a really tough business, especially European banking. Tough regulations. He is going to continue holding his. Decent dividend.

They are still facing fines. They also have to meet new regulatory standards. He would not be running out to buy, but it is a big, ugly, global bank.

Stock was down 71% on the story that there have been nefarious things going on in their accounts. This is not the 1^st bank that this is happened to. Financials were already having a tough go of it. When it broke below $48 that was a clue that they were having troubles. It had touched close to that level several times in the past year. You can see this in a lot of the financials’ charts. If this can get above $48 and there is a good tailwind behind it with the rest of the market, it would be something to have a look at.

Not impressed with what has happened recently, but we haven’t seen interest rates rise in the US. This company gets 50% of its earnings from the UK and 50% from the Hong Kong market, so interest rates likely have to move in the US 1^st before we see them in the UK. If you are looking for a proxy in Asian growth and in a European recovery story, continue to hold this.

The issue is that they are a large international bank with a large presence in Asia. Their acquisition of Household Finance was a disaster. They are not making changes as fast as BCS-N. HSBC-N has gotten lost in their strategy somewhere, so he would prefer BCS-N.