HSBC Share Price: Here’s why it’s Risky to Buy This Dip

Summary:
• The HSBC share price has come under pressure as investors abandon UK banks following the actions by Kwasi Kwarteng.

The HSBC share price has come under pressure as investors abandon UK banks following the actions by Kwasi Kwarteng. The stock has fallen to the lowest level since May this year. Still, it has done better than domestic banks like Lloyds and Natwest. It has also outperformed the SPDR Bank ETF which has crashed by more than 20% this year. 

What next for HSBC?

Banks have been terrible investments this year even as interest rates rise at the fastest pace in decades. Higher rates are usually good for banks since they lead to substantial net interest income. In the UK, the Bank of England (BoE) has delivered rate hikes in all its meetings since December. And analysts expect that it will hike by 100 basis points soon. 

In the US, the Federal Reserve has hiked by 300 basis points this year. As a result, the Hong Kong Monetary Authority has been forced to do the same. As such, HSBC will see its biggest jump of net interest income this year.

HSBC share price has also declined because of the risky policies by Kwasi Kwarteng. The new Chancellor of the Exchequer has laid out plans for more tax cuts and more government spending. As such, there are risks that the situation will continue to worsen in the coming months. 

However, analysts are still optimistic about HSBC and other UK banks. For example, while the stock has underperformed, earnings estimates for 2022 have risen by 22%. The big risk for the bank is that a hit of disposable incomes in the UK and Hong Kong continues. 

HSBC share price forecast

As I wrote in the last article, HSBC share price was forming a dangerous rising wedge pattern. In price action analysis, this pattern is usually extremely bearish, which explains why the stock dropped sharply recently. As it dropped, the stock moved below the lower line of the rising wedge. It also dropped below the 25-day and 50-day moving averages while the MACD moved below the neutral point.

Therefore, the stock will likely continue falling as sellers target the next psychological support at 450p. A move above the resistance at 500p will invalidate the bearish view.