HSBC Share prices are rock bottom - wise to buy?

MoneySaver2011_2

Hi Everyone, I'm new to this forum.

My mum has recently acquired a sum of money and used it to invest in HSBC shares which have dropped extremely low recently.

I have a fairly basic understanding of how the stock market works so what I'd really like to know is if this is a wise investment or not? Especially with most banks globally in trouble. But then if shares drop that low, surely that means they will eventually rise again?

I'm not entirely sure if my mum knows enough about the stock market to be making such an investment but if theres advice from everyone here that I can pass on to her would be great.

Thanks

talexuser

Deleted_User wrote: »

if shares drop that low, surely that means they will eventually rise again?

ask the investors of Northern Rock and Bradford & Bingley...

TattyBear

I wouldn't go near HSBC shares or those of any other financial institution. When I used to work for HSBC 10 years ago, the share price was about £8.60, and that was after it had started to drop like a stone.

After stripping out 10 years of inflation, the actual worth of HSBC shares have more than halved in value over that 10 year period.

You should've told your mother to buy gold.

Bye bye, money! :rotfl:

qpop

HSBC is still trading at a premium to tangible NAV - Although seemingly cheap compared to their price over the past year or two, they recently announced that bad debts in the US were causing a serious drag on their profitability.

Masomnia

TattyBear wrote: »

After stripping out 10 years of inflation, the actual worth of HSBC shares have more than halved in value over that 10 year period.

You should've told your mother to buy gold.

Bye bye, money! :rotfl:

And over thirty years gold is down after inflation, plus you'd have received no dividends... bye bye money indeed.

Trying to make fun of someone's decisions and misfortunes is pathetic.

atush

Well, going forwards, I can see them being a safer bet than most other banks. They certainly are not in a league both NR and BB who bet all their shareholders money on BTL and 125% mtgs.

But I would never invest everything in any one share- too bad she didn't get advice before doing so. That way is the road to disaster. They seem to be 23% down since January, but I don't knwo when she invested as they were over 700 at one point in the spring.

When did she invest (and who advised her to), and how much has she lost now (in %). If she sold now it would 'lock' in those losses but further market shocks could see them going lower.

TattyBear

Masomnia wrote: »

And over thirty years gold is down after inflation, plus you'd have received no dividends... bye bye money indeed.

Trying to make fun of someone's decisions and misfortunes is pathetic.

Dividends of what exactly? A few pence per share?

If you had HSBC shares bought for say £9 about 11 years ago, you wound't have cared less about receiving divdends on them over the last 10 years.

Aside from a massive spike in 1980, the price of gold has been relatively stable until the recent surge due to the economic climate. You may have lost value due to inflation, but you wouldn't have lost half your investment.

I'd have put the money in decent fixed return savings account. You can easily get 4%. Only high risk investments will currently beat inflation. You can either put your money in something where it will be safe and retain most of it's value, or you can put it in a bank which can go bust, or you can buy overpriced HSBC shares that have died a death over the last few years.

Ark_Welder

http://www.ft.com/cms/s/2/1773d1a2-0c5d-11e1-8ac6-00144feabdc0.html#axzz1dKpnfwit

BLB53

HSBC are possible the best of a not very attractive bunch in the banking sector.
They are worth holding for the yield but only as part of a diversified share portfolio. If she only has one or two shares then far better to switch to a low cost tracker or inc. & growth investment trust e.g City of London.

MoneySaver2011_2

Thanks for the advice so far. The general consensus I'm getting is that HSBC is the best of a bad bunch and probably the slightly safer option out of all the banks to invest. Still, I just don't trust what my mum's done.

There is ony vital piece of information I left out in my original post actually which I should have mentioned. The shares she bought were on the Hong Kong stock market.

lvader

While I don't really think it's a bad investment, you could also say HSBC have a lot more potential to drop and less potential to gain compared to some of the other banks. Any single stock is quite a big risk so thats why you need to spread the risk.