As the HSBC share price outperforms, is it still a good buy?

The HSBC (LON: HSBA) share price has done well in 2023 as investors focus on the company’s turnaround strategy. The stock has risen by 20% in 2023, outperforming other bank shares considering that the KBE ETF has dropped by more than 20% this year. It has also outperformed other British banks like NatWest, Lloyds, and Barclays.

Turnaround continuing

HSBC stock price has been in a strong bullish trend as investors focus on the company’s turnaround strategy. The company has been working to boost its Chinese business in the past few months. It has done that by exiting some of its low-margin businesses in the United States, Canada, and France.

As a result, HSBC is now allocating more money to the lucrative business in China, a country that has created more than 780k dollar millionaires. It hopes to gain a substantial market share in the country’s wealth management business.

HSBC has also won a fierce battle with Ping An, its biggest shareholder. Ping An has long advocated that the bank should break itself into two companies. One business will focus on Europe and other international markets while the rest will serve Hong Kong and mainland China markets.

The logic makes sense on paper since investors would be able to invest in the bank they prefer. However, HSBC believes that breaking the bank would be expensive. Also, doing so would make it lose its appeal with its clients since the bank uses its international brand to do business. For example, it is used by most European investors doing business in China and vice versa.

Shareholders agreed with HSBC and defeated Ping An’s proposal. At the same time, the bank is taking advantage of higher interest rates to reward its shareholders. It is repurchasing stock worth over $2 billion and has an annual dividend yield.

The challenge for HSBC is that the Chinese market is highly competitive with companies like UBS having a substantial market share. Also, the common prosperity strategy by Beijing and the country’s slow growth could hit its results.

HSBC share price forecast

HSBC chart by TradingView

The HSBA stock price has been in a strong bullish trend in the past few months. This rally started when the shares crashed to a low of 505.3p in March this year. It has now moved above the 25-day and 50-day exponential moving averages (EMA).

A closer look shows that it is below the crucial resistance point at 619p, the highest point on March 9 and its all-time high. Oscillators have also continued rising. 

Therefore, the outlook of the stock is bullish as long as buyers manage to push it above 620p. This is important since pushing it above this price will invalidate the double-top pattern that has formed. In most periods, this pattern is usually bearish, meaning that it is important that bulls move above it. As such, I would not recommend buying it for now.