HSBC hit as White House said to weigh future of Hong Kong-US peg

Shares in HSBC fell sharply on Wednesday following reports that the White House was considering undermining the decades-old peg between the Hong Kong and US dollar.

According to Bloomberg, the Donald Trump administration is exploring ways to punish banks based in Hong Kong, and especially HSBC, after mainland China imposed controversial national security laws on the city. The legislation is viewed by some as a threat to Hong Kong’s autonomy and political freedoms, and has drawn international criticism.

But last month, Peter Wong, HSBC’s most senior executive in Asia, signed a petition supporting the legislation, angering the White House. Mike Pompeo, the US secretary of state, at the time called it a "show of fealty" that had earned HSBC "little respect in Beijing".

However, Bloomberg said that not all members of the administration were in favour of undermining the peg, with concerns that it might hurt only Hong Kong banks and the US, and not China. It also has not been elevated to the White House’s most senior levels, Bloomberg said. But punishing banks such as HSBC remains a "top priority", the report added.

Shares in the blue chip, the largest note-issuing bank in Hong Kong, fell on the report, and by 1030 BST were off 4% at 380.13p in London. Fellow Asia-focused bank Standard Chartered also came under pressure, off 2% at 433.0p.

Jasper Lawler, head of research at London Capital Group, said the report would be a concern for all Hong Kong-based companies. "Should the peg disappear, it could further destabilise Hong Kong and increase currency impacts on earnings," he said.

Michael Hewson, chief market analyst at CMC Markets, said: "Whether this would actually happen is unclear. However, it would be a major escalation were the US to go down the route of destabilising a currency."

Expansion in China is core to HSBC’s long-term plans to pivot to Asia. The bank derives around 55% of group profits from Hong Kong and more than two thirds from Asia as a whole. It is currently in the process of cutting $4.5bn of costs worldwide by 2022, including axing 35,000 jobs, and intends to shrink its US retail, French and non-ringfenced UK exposure.

But the US and its American clearing licence is vital to the bank’s global operations, with dollars the currency of choice for many commodity markets.