HSBC Holdings PLC ADR HSBC

HSBC on Firmer Footing to Lead in Core Markets

We see HSBC's strong positions in the banking systems of Hong Kong and the UK—as well as its ability to link these two to support global business—as its main source of competitive advantage. Its broad scale of global operations leaves it subject to higher capital requirements than if it were more narrowly focused, although the diversification also reduces profit volatility compared with peers, as seen during the global financial crisis. Given that China, Hong Kong, and Singapore are important hubs of wealth and growing trade corridors, the bank's pivot toward Asia—which generates around 75% of its pretax profit—is strategically sound, in our view.