Eight months after HSBC suspended its dividend, its shareholder base in Hong Kong appears to have fallen in love again with the biggest of the city’s three currency-issuing banks. Battered by the dividend cancellation and increasing concerns about how a poor economic outlook and worsening US-China relations could weigh on its results, the London-based lender’s shares hit a 25-year low in September. Just over two months later, however, the bank’s prospects – and its share performance – are looking up. As of Friday’s close, its stock in Hong Kong had risen 54 per cent from its September lows, and regained nearly all of its losses since April 1, when it cancelled its final 2019 dividend and suspended its dividends this year at the request of its primary regulator in the United Kingdom. The bank’s stock could go even higher if an arm of the Bank of England (BoE) agrees to allow HSBC and its Hong Kong rival, Standard Chartered , to resume dividends later this month, according to Goldman Sachs . “The [BoE’s] decision could be a positive catalyst, which could make dividend/capital returns an ‘invest’-able theme at the two banks (again),” Goldman analysts Gurpreet Singh Sahi and Martin Leitgeb said in a research report on Friday. The BoE could allow UK-based banks to resume paying dividends as soon as December 11, when the central bank releases its latest financial stability report, according to Goldman. That could lead to a more than 20 per cent upside in HSBC and Standard Chartered’s stocks, if the two banks were able to pay an annual dividend in 2022 equal to their four-year average from 2014-2018, the Goldman analysts said. Any dividend for 2020 is likely to be small – US$0.15 a share for the second half of the year, the analysts said. In October, HSBC said that it may pay a “conservative” dividend for the full year after executives were encouraged by its performance in the first three months of the year, and the improved economic outlook for 2021. The company reported a better-than-expected third-quarter profit and said that it expected to make provisions for potential soured loans from the economic fallout of the coronavirus pandemic at the “lower end” of a range of US$8 billion to US$13 billion that it forecast in August. However, any payout would depend on economic conditions early next year and discussions with regulators. “We know that dividends are important to all of our shareholders and we want to restart paying dividends as soon as we can and build from there,” Noel Quinn, the bank’s chief executive, said in October. HSBC declined to comment for this story. A return to payouts would be a welcome relief for the bank’s Hong Kong investors, who have been sorely tested this year. “It is good news to many ageing investors who relied on the HSBC dividend as their regular income. The suspension of dividend has hard hit them very seriously,” said Christine Fong Kwok-shan, a district councillor in Hong Kong. Amid a rebellion among HSBC investors in its biggest market in April, Fong appealed on behalf of more than 500 retail shareholders to the Securities and Futures Commission to act to safeguard the interests of local investors. #China is continuing to promote reform and opening up, and strive to create a better business environment, which will create more opportunities for international businesses, including #HSBC . @HSBC_UK https://t.co/w1IIA6Yh3r — Liu Xiaoming (@AmbLiuXiaoMing) October 20, 2020 “However, there are some investors who may [have sold] their HSBC shares and they will not be compensated,” Fong said in a telephone interview on Friday. “Overall, we urge HSBC not to suspend paying the dividend in future, as it should take care of the interests of its loyal Hong Kong shareholders.” Under Quinn, the bank has become even more reliant on Asia, as it makes a big bet on future growth in China and the Greater Bay Area. However, it has faced a challenging year as the lender has found itself increasingly caught in the middle of rising tensions between the world’s two biggest economies. American officials criticised HSBC over its support of a controversial national security law adopted by Beijing for Hong Kong in June. And mainland media reported the lender could be placed on an “unreliable entities” list over help it provided to US prosecutors in an investigation of Chinese telecommunications company Huawei Technologies . Those threats seemed to have subsided somewhat as Liu Xiaoming, China’s ambassador to the UK, pointed in a tweet in October to HSBC as an example of how China was opening up its markets to foreign businesses. The bank was also among a dozen lenders to manage China’s latest sovereign bond sale last month. But HSBC and its Hong Kong rivals still face a challenging operating environment. Interest rates are expected to remain at historic lows for years, and the city’s economy has been slow to recover from months of anti-government protests last year and the fallout from the pandemic, pressuring their bottom lines and prompting lenders to consider more fee-based products. Hong Kong’s economy is expected to contract by a record 6.1 per cent this year. “If HSBC and Standard Chartered Bank resume paying a dividend, certainly it will help give a small boost to their stock prices,” said Robert Lee, the vice-chairman of Hong Kong Securities Association. “It is hard to imagine a very big jump, especially in the current low-interest environment.” The big question for investors is how much capital HSBC and its rivals will be able to return as they navigate an uncertain environment next year. “Last year, HSBC distributed HK$4 per share in dividends. If it pays HK$1 of dividend next year, I think it can support a rebound in its share price to the HK$50 level,” said Francis Lun Sheung-nim, the CEO of GEO Securities. “Standard Chartered may see an even stronger rebound, given its share price’s discount to its book value is steeper than that of HSBC.”