The latest Investing Matters Podcast with Jean Roche, Co-Manager of Schroder UK Mid Cap Investment Trust has just been released. Listen here.
Hi All, It is some while since I posted on this board, but seeing the very recent changes on another well-known board, I thought that I would return here for a change!!! The long-awaited Strategy Update hasn't really given us any "exciting" news - just more of the same, including maintaining the dividends at the current level, and using buy-backs to compensate for scrip dividends! Although muted, the market reaction appears negative, especially as the FTSE100 is currently up, and sterling is down against the US dollar. When will HSBC really achieve something profound? I am, however, still willing to hold these shares for the dividends and may even take a few scrips again this time, hoping that the share price will increase in due course, but it seems that considerable patience is still required. Have a good week. Regards, Steve
Hi All, Shelling peas may well be relatively easy, and the taste of freshly picked peas is wonderful, but anyone who has ever attempted to grow peas on a small scale in a domestic garden or even an allotment, knows that quite a lot of peas are required for a decent sized portion. Similarly, for UK investors to cover stamp duty costs and two lots of fees (buying and selling), a considerable number of shares would be required to turn a 15.5p share price gain from 666p into a reasonable return. Growing peas successfully is all about timing, and although the mangetout/sugar-snap varieties tend to mature more quickly than the others, twenty days is a very short growing season. Many of us have sometimes started to harvest our crops too early, whereas waiting a few extra days would produce a much better result - similarly, people sell (part of) their holdings only to see the share price rise further the following day! This week has been quite good for HSBC shares - in fact, the closing price has risen (slightly) each day this week, which has not happened since the week before the annual results were announced. With the AGM next Friday, and the first quarter update in early May, I am hoping the share price will continue to rise, rather than dip below 670p again! Assuming the normal 10c per share is declared in early May, then some income will also be received in July, which at current levels (share price and exchange rates), equates to roughly 1% per "quarter", with a larger dividend usually being declared when the annual results are announced. Due to the adverse weather conditions earlier in the year, our gardening "projects" will be starting much later than usual, but we still hope to grow some tasty produce. Similarly, for various reasons, HSBC shares have had a poor start this year, but hopefully there is much better to come. Have a good weekend, and the weather forecast looks quite good for the week ahead. Regards, Steve
Hi All, It seems that big business, including the large financial institutions, is becoming increasingly complex, making it difficult for the small private investor to really understand what is going on. Obviously the Banking sector needs to be properly regulated to prevent (or minimize the effects of) another Financial Crisis. Even the frequent comparison between reported and adjusted profits is somewhat confusing, and how many of us read and understood the 274 page annual report? The recent ISSUE OF PERPETUAL SUBORDINATED CONTINGENT CONVERTIBLE SECURITIES is about as "clear as mud" to me, and even some of the detail within the resolutions to be voted on at the AGM seem difficult to understand! Although I hold these shares primarily for the income stream, that fluctuates considerably due to the VoLaTiLe ExChAnGe RaTeS!!! By taking some scrips instead of a portion of the cash dividend, I am likely to hold quite a few more shares by the end of this year than I did at the beginning of last year, but I have a feeling that the total sterling dividend this year (2018) will be lower than it was last year (2017), simply due to what is happening to the sterling to dollar exchange rate. There was even quite a difference in the exchange rates in the short time between when the most recent scrip price was set (effectively 1.3878) and when the cash exchange rate was announced (1.422573). For the small private investor, that makes relatively little difference, but for large institutional investors it could be significant but, of course, on this occasion we could buy in the open market (including stamp duty and fees) at a (much) lower cost than the sterling scrip price - so I got it wrong this time! As for Buy-backs, well they tend to distort things even further, especially while the buy-back is in progress, despite all the safeguards built in to prevent market abuse! And it is a very good question - Who really benefits from them? Some investors would much prefer to receive a Special Dividend. I suppose what we would all like to see is a good income stream (including dividend growth), coupled with an increase in the share price. So far this year, we have seen a significant downturn in the value of the shares, and the dividend is likely to remain flat at 10c per share for the next three dividends, but we can still hope for better things to come. Regards, Steve
Hi All, It was great to have a nice long Easter weekend break to focus on other things, and didn't even realize until very late last night that the US market had been trading yesterday - DOWn yet again! Although we have seen a new closing low so far this year, here in the UK today, I am sure many of us feared that it would be much worse, but for how much longer will this downward tend continue? Hopefully, we will see some improvement during this second business/trading quarter, and I am still hopeful that as HSBC (and other) dividends shortly hit bank accounts, that there will be renewed interest in these shares, and help lift the price a little. Regards, Steve
Hi All, With the UK stock market now closed until Tuesday, we have a month-end closing price, and a quarter of the trading year has gone! Clearly not a good start to the year, unless you have been waiting in the wings ready to buy the shares at a low price. If you would rather not see the results, then look away now! At the end of last year (2017), the shares closed at 766.90, and for the month-end closing prices in January, February and March this year, we have:- 751.10; 717.10; 665.40. This downward trend is very disappointing, and there are now over 20 billion shares in circulation, with more (scrips) to be issued next Friday, but it is good to see the FTSE 100 index back above 7000. At the end of 2016, the share price was 656.90, and for each month-end (January to November inclusive) last year (2017) the closing price was as follows:- 676.40; 646.50; 650.90; 636.50; 675.60; 711.70; 757.00; 750.50; 737.10; 734.30; 734.00. Hopefully, the second half of this year will also prove to be better than the first (quarter). There has sometimes been considerable renewed interest in the shares when (or soon after) the cash dividends are paid, and a couple of days ago a Non-Executive Director purchased over 26,000 shares at the market rate - over 672p per share, so let us take encouragement from that. With about US$ 3.8 billion to be paid in cash dividends next Friday (6th April), albeit in a variety of currencies, there is potential for some serious re-investment, especially at this comparatively low share price. I look forward to a brighter future. Have a good Easter. Regards, Steve
Hi daltry, Some existing investors, clearly have continued confidence in HSBC, as the allocation of scrips has now been announced - with 39,256,458 new shares to be issued on 6th April - which represents about 9.36% take-up rate, only slightly lower (percentage) than the previous two dividends, when the price was even higher! The cash exchange rate announced on Monday was certainly the worst since the BREXIT referendum, and a lot less favourable than when the scrip price was set. As with all the other major banks, the share price is down again today - HSBC is currently trading at a similar price to where they were about a year ago, but the FTSE 100 index isn't doing very well either - I read something last weekend, that it is at about the same level that it was when it peaked (at that time) at the end of 1999! I am not aware that the index has ever been "re-set", but the make-up of the FTSE 100 index has obviously changed considerably since then - and even more so, since it was first established (in 1984), as a result of mergers, acquisitions, relative performance of companies, and of course, company failures! There was an interesting article in yesterday's Money section of the Daily Telegraph, asking the question "How much can you afford to lose?" and suggesting that before deciding where to put your cash, you need to know how much risk you can take to get there - until you experience the pain of losing money it feels like an abstract concept. Everyone wants high returns, but how big a drop can you stomach? But share price dips only result in a loss if we need to sell, and apart from the adverse exchange rate, nothing has so far changed to affect the income stream from HSBC shares - my main reason to continue to hold. I don't like the current share price, especially as I opted for some scrips for this and the previous two dividends - hopefully, it will recover in due course, but I am not expecting any "quick-fix". We need to see a clear strategy/vision for the future, and give the new top team the opportunity to make a difference - I wonder if there will be any clues at the AGM, or when the first quarter results are announced in early May. Regards, Steve
Hi All, Although there may be some dilution with scrips, how many small private investors are really concerned by that? I have owned HSBC shares continuously since early 2001, but have never attended an AGM or voted in proxy - with about 20 billion shares in circulation, my holding is insignificant! Before the 2009 Rights Issue, there were about 12 billion shares in circulation and as 5 new shares for every 12 were offered, which I believe was almost fully taken up, this resulted in about 17 billion shares being in circulation. Since then, new shares have been issued for a variety of reasons - management performance pay, employee share options/savings schemes and or course scrips. At least with the most recent buy-back, there was a net reduction in the number of shares in circulation. If a company did not offer a cash option for the dividend, then perhaps it would be a sign of weakness and that the dividend was not really affordable, but HSBC have always offered cash or scrips, or indeed a mixture of both (which is my preferred option). Previously there were tax advantages for taking scrips, but even without that, I still like to take additional shares - to gradually increase my holding, and obtain a bigger dividend in the future. Despite the fact that the shares are currently trading below the scrip price, I have now opted for some scrips for the following reasons:- Firstly short term:- With such volatile exchange rates,it is difficult to predict what cash exchange rate will be declared on 26th March!; Similarly, it is impossible to predict the price of HSBC shares on or after the dividend payment date (6th April); Dealing costs and stamp duty would add a significant cost per share, for such a small quantity. Longer term:- Assuming the dividend is maintained, there will be a small increased dividend entitlement (US $) for each subsequent dividend; Hopefully the new senior management team will outline a clear strategy to grow the business, and the share price will pick up in due course; Perhaps a further buy-back will be announced, to reduce the number of shares in circulation and cause the share price to rise. My investment "strategy" is very much long-term, and I hold these shares for the (potential) income. Have a good week, Steve
Hi longtimeinvestor, I would agree that there does appear to be a conflict with issuing scrips on the one hand and buying back shares on the other! HSBC, like several other companies, have been offering scrips for a long while now, and only relatively recently started buy-backs. Scrips were offered well before the major Rights Issue in 2009 and ever since - and I see from the recent Stock Exchange announcements regarding the AGM, intend to continue to do so. For small private investors, the scrip option provides the opportunity to gradually increase their holding, without incurring dealing fees or stamp duty. If the current downward trend since the scrip price was set, continues, then it is unlikely that the take-up will be very high - it was certainly quite low for the two most recent dividends, when the scrip price was even higher! Personally, I like to take a mix of cash and scrips, so I am quite happy for this option to continue - it would certainly not be cost-effective for me to buy such a small quantity of shares on the open market. It will be interesting to see what happens to the shares currently held in Treasury. Regards, Steve
Hi daltry, Yes! The recent drop in the share price is very disappointing, but having held HSBC shares continuously since early 2001, I have seen it all before - several times! During that time I have seen them above �10 per share and, at the other end of the spectrum, took advantage of the Rights Issue in 2009 at �2-54 per share. They pay a reasonable dividend, and even during the bleakest of times, somewhat smaller dividends were paid each quarter. At various times, I have re-invested some of the dividend in scrips, and even took some shares for the previous two quarters - at 766.06p and 744.34p! I believe we need to be patient and see what the new Chairman and CEO will deliver, and may even take a few scrips this time round, hoping for better times in due course! History tends to repeat itself, so although disappointed, I am certainly not shocked by the recent downturn. I have always viewed my HSBC shares as a long-term investment, and a means of enhancing my retirement income, when the time comes. Regards, Steve
Hi All, If my calculations are correct, then the sterling scrip price will be 721.84p per share, and based on the exchange rate which I saw at about 11:00am this morning, would be about US$10.02 per share, which still gives a yield of over 5% (in dollar terms) for a full year at current dividend levels. Regards, Steve
Hi All, The much lower volume of shares traded today in both Hong Kong and the UK, tend to indicate that we are beginning to return to "normal" (whatever that is)! I intend to keep a low profile (or even return underground) until the middle of next week, when we should know the sterling scrip price. Have a good weekend. Regards, Steve
Hi All, Having just emerged from my bunker, the landscape looks very familiar - with just a minor bit of damage here and there, but surely nothing which the new maintenance team will be unable to fix - given enough time and not too many other distractions! With such a good increase in profits announced, the share price dipped again, so what will it take to see the share price rise when the annual results are announced? I suppose the absence of any further buy-back (at this stage) and no increase in the dividend didn't help matters, especially as UK investors are likely to see less sterling dividend than last year! Also the share price having increased considerably since we first saw 51c total dividend means that the current yield is significantly lower than it was. Historical and current yield are very important factors to consider when making any investment decision. My block of HSBC Rights Issue shares which cost just �2.54 per share give me about a 14% return on my initial investment, and have also risen considerably in value. I could take the capital gain and re-invest the new total for a much lower yield, but I would prefer to receive the income, because even at current levels, about every seven years I would receive the original cost of the shares in dividend income, plus the potential for further price increases - these shares have already more than paid for themselves with the dividends received since then. Later this year, I will have received over US$10 per share on the original block I have owned continuously since early 2001, and over US$4.25 per share since the Rights Issue which were offered at US$3.61 I believe that we need to be patient to see what the new top team will do, and although the outgoing CEO has retired from the board, it seems that he will still be hovering around in an advisory role until October, and as he intends to continue to be a significant shareholder with some 3.7 million shares, he will obviously be keen to see HSBC do well. Anyone with a significant amount of spare cash could have done well by buying in early on Tuesday, but some of us will have to be content with re-investing some of our dividends by taking advantage of what will hopefully be reasonably priced scrips, which are free from any dealing costs or stamp duty/SDRT, which can make significant inroads to any small investments. It all depends what happens during the next few days (commencing today) and the exchange rate in the middle of next week. I look forward to seeing what the short, medium and long term future holds. Regards, Steve
Hi All. We currently have an interesting situation - with the Lunar (Chinese) New Year celebrations underway, it appears that the Hong Kong Stock Exchange closed early today, and will not re-open until Tuesday, then after the morning session, the Annual Results will be announced. Even in the UK, there are only two full trading days left before the results are announced and any dividend declared (very early on Tuesday morning, with the shares going ex-dividend just two days later! I see that our membership of the "754 Club" was briefly renewed earlier today, only to be cancelled before end of play! It will be interesting to see what happens to the share price during the next few trading days, and also the exchange rates when the scrip price is set, and the cash exchange rate announced. I just hope that the shares don't dip like they did last year on the day the annual results were announced, and didn't fully recover until the end of June, but at least they are now well above where they were this time last year. As I am unlikely to post again before the results are announced, have a good weekend and/or Lunar (Chinese) New Year celebrations. Regards, Steve
Hi All, The recent downward adjustment in world stock markets and the continued volatility of exchange rates present real opportunities for investors:- For those who had previously sold out, it was clearly an opportunity to buy back in at lower levels; Similarly, those with plenty of "spare" cash could have found some real "bargains"; HSBC could have been purchased for as little as about 727p. For those that do really well, it is all about good/perfect timing - selling at the peaks and buying during the troughs. Any adjustment presents an opportunity for all investors to re-evaluate their portfolios, and decide which shares are the most important/worthwhile. From the recent stock market announcement it is obvious that HSBC intends to pay a fourth interim dividend, but we will have to wait until the 20th to see how big that will be, and if there is any Special Dividend. I am not aware that HSBC has previously paid a Special Dividend, unless it was a long while ago - I have held HSBC shares continuously since early 2001, and there not been such a dividend during that period, but normal quarterly dividends have been paid, even through the depths of the financial crisis - albeit at a significantly reduced level. One of the reasons for continuing to hold these shares is for the dividend income - even if we do sometimes re-invest a significant proportion of that into more shares, by taking up the scrip option, but as long as the dividend is maintained at the current rate, that just increases the future dividend pot. I would love to see the dividend increased, but if there is still "spare" cash available, then a further buy-back may well be announced. Not long to wait now. All the best with your investments. Regards, Steve
Hi Sunee, I haven't a clue what the possible impact of the US tax reforms will be on HSBC results, and looking at what happened in the US markets today, I am more concerned of the knock-on effect as world markets open again on Monday morning. I see that you are already back in, but don't be surprised if the price dips again after the weekend! It has not been a good week here in the UK - HSBC shares are down over 20p since the end of last week, and well down from the "peak" of 796p on 11th January. Not long now until the annual results. Have a good weekend, Steve
Hi Guzbod, Thanks for your kind comment. The HSBC scrip price is calculated using the average of the London closing prices for the first five trading days when the share goes ex-dividend, and then converted back to dollars using the exchange rate at about 11.00am on the fifth trading day. There is then usually plenty of time to opt for scrips, but the choice always has to be made BEFORE the cash exchange rate announcement is made - much closer to the dividend payment date. With the recent daily fluctuations in exchange rates, who knows which will be best? Sometimes there is a considerable difference between the effective scrip exchange rate and the cash exchange rate - for the September 2017 dividend the scrip exchange rate was best (but the scrip price was rather high, and certainly above today's "value"), but for the November 2017 dividend the cash exchange rate was better! We tend to take a mixture of scrips and cash, and plan to continue to do so while the scrip option is still available. Regards, Steve
Hi All, Clearly not a very good start to the year, with the share price down over 15p since the end of last year, but higher than at the end of August, September, October and November 2017. I see that the US has left interest rates unchanged, so it will be interesting to see what happens to the sterling to dollar exchange rate as we head towards the year end results, and before any scrip price is set and cash dividend paid. Although we now have a few more shares than at the beginning of last year, my wife and I do not expect to receive as much dividend in sterling terms as we did last year! The exchange rate (especially for scrips) was particularly good for the April 2017 dividend. It will be interesting to see all the major banks year end results, and try to determine the likely impact of BREXIT leaked reports, official releases, negotiations etc.... Hopefully the new top team will have some good fresh ideas to move HSBC forward in the right direction, and provide even better returns for its shareholders. Regards, Steve
Hi Sunee, That is an interesting, and slightly "risky" strategy - to sell out hoping to buy-back in soon at a lower price! It doesn't seem long ago that you were expecting the price to reach 88/89 HKD, and that you would probably sell out then. It will be interesting to see what happens to the share price within the next three weeks, before the annual results are declared - and immediately after, but don't forget that the shares go ex-dividend very quickly following the results! I am certainly looking forward to the dividend, which will be paid in early April - some of which I may well re-invest in scrips - depending on the share price and � to US$ exchange rate. Having held HSBC shares continuously since early 2001, I am here for the long-term and will continue to hold for as long as possible. All the best, Steve
Hi Sunee, I am not convinced that the lower HSBC share price in London today has much to do with the demise of carillion, for the following reasons:- Carillion collapsed early on Monday morning (UK time), so that is quite a delayed reaction; The share price of several other banks which also had exposure to carillion are holding firm (or even higher) in London today; The likely write-down for any loss incurred by HSBC is expected to be much lower than other losses during recent years; No stock market announcement has so far been made in respect of this (or anything else since last Thursday). I expect there is some profit-taking following the recent rise, and it seems strange that the US stock market continues to climb so quickly, and the HK market (and HSBC) was higher today, but this is not reflected in London - the FTSE 100 is also down yet again! It will be interesting to see what happens in the US when the stock market opens there. Regards, Steve
Hi All, What a strange week! High trading volumes in both HK and UK, with a sudden spike in the share price on Wednesday, but not really sure why! I expect that by now the broad brush profits are known by the "inner circle" - usually a small, select, trusted team, who will be expected to closely protect any price-sensitive information, while the auditors trawl through the accounts, and until the official figures are announced on 20th February. Has someone let something slip - perhaps an unguarded comment, thought to be of little significance, but actually quite important? Also what is happening to the sterling/dollar exchange rate? Membership of the 754 Club continues well, but hopefully we will soon be able to rejoin the 800 Club - not seen for a very long time. Have a good weekend, Steve