HSBC, StanChart slide 3%-5% as JP Morgan flags MCV business friction

HSBC Holdings and Standard Chartered slid 3% and 5% respectively on June 5 after JP Morgan flagged regulatory friction in their mainland China visitor businesses.

"The new friction in account opening may hinder business growth," JP Morgan said in a report, citing channel checks showing mainland visitors face longer approval times and must sign an "Investor Declaration Form" when opening investment accounts in Hong Kong.

HSBC underperformed the Hang Seng Index by 2 percentage points, while Standard Chartered trailed by 4 points. JP Morgan estimates MCV-related business — including wealth fees and deposit-spread net interest income from both existing and new-to-bank clients — will contribute only about 2% of each bank's 2025 revenue, implying a mid-single-digit percentage contribution to earnings per share.

A separate concern involves an emerging regulatory framework for mainland residents' outbound direct investment. Although detailed measures have not been released, the framework could significantly affect the private banking and wealth management operations of Hong Kong financial stocks, JP Morgan said. The broker believes that if negative sentiment continues to overreact, it could create buying opportunities.

The selloff leaves both stocks trading at levels that may already reflect the regulatory headwinds, given the modest 2% revenue contribution from MCV business. Investors will watch for further clarity on the ODI framework, which JP Morgan said could be the next catalyst for the sector.

This article is for informational purposes only and does not constitute investment advice.