HSBC Holdings PLC (LON:HSBA) and Standard Chartered PLC (LON:STAN) saw their shares decline on Wednesday following reports that the US government is considering measures to undermine its links to the Hong Kong economy amid continuing fallout over new national security laws.
The London-listed banks, which have large business interests in Hong Kong and mainland China, came under pressure after a Bloomberg report on Tuesday said advisors to Donald Trump had considered proposals to try and uncouple Hong Kong’s currency peg to the US dollar, possibly by making it harder for the city’s banks to buy the greenback.
READ: HSBC to invest further in mainland China despite fallout over Hong Kong security law
However, there were apparently concerns in the White House that such a move could backfire against US banks and only cause the financial sector to suffer rather than China.
The Hong Kong dollar, the city’s accepted currency, is currently pegged at a range of between HKD$7.75-7.85 against the US dollar, which is often cited as one of the key advantages of the city as an international finance centre.
If the US did move to undermine the peg it could damage HSBC’s profits, two-thirds of which come from Hong Kong, by increasing the effects of currency movements on the bank’s income.
The news marks yet another problem for HSBC as criticism mounts on the bank for its outward support for the national security law, which has been criticised by human rights activists as effectively outlawing all criticism of the Hong Kong government and the Chinese Communist Party that governs mainland China.
HSBC shares were down 2.8% at 384.1p in late-morning trading, while Standard Chartered fell 1.3% to 436.3p.