LONDON, UNITED KINGDOM - February 08: HSBC bank branch with glass wall on Oxford Street in London, UK - February 08, 2015; HSBC bank branch with people outside on street using ATM machines
The HSBC share price popped by more than 2% on Wednesday as investors cheered the recent actions by Evergrande. The stock is trading at 393p, which is about 20% above the lowest level last week. This makes it one of the best-performing stocks in the FTSE 100 index.
Evergrande is one of the biggest property developers in the world. For more than two decades, the company has built thousands of properties in mainland China. It has also expanded its business offerings to other industries like purified water and electric cars.
But Evergrande is also one of the most indebted companies in the world. It has more than $306 billion in liabilities and there are concerns about how long it can keep going as a going concern.
The collapse of Evergrande has had major impacts on companies with exposure to China like HSBC and Standard Chartered. While these two companies have western roots, they do most of their business in the Asian market.
The HSBC share price is rising today after Evergrande announced a plan to sell a 20% stake in a Chinese bank for $1.5 billion. The company will still hold about 14% of the bank. The firm will use most of these funds to pay some of its most urgent debt obligations.
Therefore, the stock is rising because odds of an imminent collapse of the company have declined. Still, the firm faces ab uphill climb going forward. For one, it will need to raise capital to finish most of its incomplete projects.
The daily chart shows that the HSBC stock price has rebounded sharply in the past few days. It has even formed a hammer candlestick, which is usually a bullish sign. Also, it has managed to move above the 25-day and 50-day moving averages. The Average True Range (ATR) indicator has also been on an upward trend.
Therefore, for now, the HSBC share price will likely maintain a bullish trend as bulls target the key resistance level at 410p. Still, in the longer term, the company still faces some key risks as the Chinese economy slows and as the government implements the common prosperity program.