HSBC, Stanchart shares plunge in Hong Kong as Brexit vote sees ‘Leave’ camp ahead

With Brexit count continuing, banks remain silent over plans if ‘Leave’ vote wins

PUBLISHED : Friday, 24 June, 2016, 11:44am
UPDATED : Friday, 24 June, 2016, 12:20pm

Shares in British banks HSBC and Standard Chartered trading in Hong Kong dropped significantly in early trading Friday morning as the results of the EU referendum were still being counted.

“A decision to leave will deal a blow to the British economy and will be felt on the balance sheets of British banks and those with exposure to the UK,” said Louis Wong, director at Phillip Securities.

HSBC Holdings shares were down 8.2 per cent in early morning trading and shares in Standard Chartered at one point were down 9.8 per cent.

Banks in the UK are keeping quiet about their plans as the Brexit referendum on EU membership is currently too close to call, but predictions in the early stages of vote counting suggest a “Leave” vote looks more likely.

Speaking in the months leading up to the referendum, senior figures from banks including JP Morgan, HSBC, and Deutsche Bank all indicated that they would consider moving staff away from the UK should the UK decide to leave the EU.

When contacted by the South China Morning Post this morning, neither Deutsche Bank nor HSBC said that they would comment on the matter, and JP Morgan could not immediately be reached.

The UK financial sector accounts for approximately a quarter of all EU financial services income, and nearly 40 per cent of European assets under management are managed from the UK.

A large number of non-EU financial institutions use the UK as a hub to access clients and markets across the EU, while many EU firms also maintain branch presences in London. Both arrangements are currently enabled by EU regulations.

I would think the immediate impact on banks operating in the city would be quite dramatic if Brexit happens
Brett McGonegal, Capital Link Investment Holdings

“I would think the immediate impact on banks operating in the city would be quite dramatic if Brexit happens and would most likely raise a host of very troubling issues,” Capital Link Investment Holdings chairman and chief executive Brett McGonegal told the Post Friday morning. “EU licensed activities would be curtailed as would investment. I also think that reserve requirement and taxation issues would cast a shadow on the banks, thus really crippling activity.”

As of 11.15am Hong Kong time, there was almost 600,000 votes difference between the two sides, with Leave at 10.8 million and Remain at 10.2 million. The BBC estimates that a figure of just over 16 million is required for victory, depending on turnout. While the BBC says the result is still too close to call, John Curtice, professor of politics at the University of Strathclyde, told the BBC that he anticipated a narrow win for the Leave camp.

Investment banks’ trading departments have responded to market volatility by calling in staff. One banker from a leading US bank in the UK told the Post that traders had been working at 3am this morning dealing with the follow on from the referendum.

Whatever the result of the referendum, the UK will remain a member of the European Union on Friday. The procedure for any state to leave the EU is that they should notify the European Council under so called article 50 of the Lisbon Treaty (signed in 2009). A two year negotiation period would then follow.

The precise impact on banks operating in the UK would depend on the arrangements agreed during this negotiation period.