Barclays, RBS, LLoyds and HSBC share prices hit by Brexit divide
Since January, the UK-focused banks have seen a rally, followed by sharp declines. But for those with more of a focus on Asia, the picture looks brighter.
While equities have rallied so far this year, with the FTSE 100 up around 8%, the UK banking sector has not done anywhere near as well. Indeed, of the big five, only Standard Chartered and HSBC have managed to outperform the index, posting returns of 20% and 5% respectively.
The other three, the UK-focused trio of RBS, Lloyds and Barclays, have given back all the gains from the first four months of the year, and indeed are now (on a price basis) flat for the year. It is not hard to work out why there is a disparity between the UK-focused institutions and the two banks with significant exposure to Asia; it is, in a word, Brexit.
The UK was granted an extension from the end of March to the end of October to pass the agreed Withdrawal Agreement, but with the planned departure of the UK prime minister by late July, the government has been consumed by the race to succeed Theresa May. Boris Johnson remains firmly in place as the favourite, and as a result markets view the possibility of a ‘no deal’ Brexit as having sharply increased, with potentially dire consequences for the UK economy, consumer spending, housebuilding and other effects that will hit UK-focused banks hard.
So long as this remains a distinct possibility in terms of Brexit outcomes, then those banks with a main focus on the UK will lag behind their internationally-focused peers. A no deal may be avoided, or it may be mitigated, perhaps sparking a recovery, but such uncertainty will not be cleared in the short term.
The shares surged impressively until the middle of April, when a peak around 265p was followed up by a swift drop. The shares have formed a base above 210p and are now attempting to move above 220p. A move below 210p could see a retracement to 190p, the December lows.
The price is back below the 200-day simple moving average (SMA) at 57.4p, having shed around half the December-April bounce. If the price can hold 56p, then move back above 60p, a more positive view may develop. However, below 56p, 51p and then 48p may be potential downside targets. The price is still comfortably above the December low, which might indicate the creation of a higher low, but for now the outlook remains tilted to the bearish side.
Even the bounce from late December failed to really shake off the longer-term decline, with the price rapidly dropping back below the 50-, 100- and 200-day SMAs. However, a possible bullish wedge has formed, with a break above 152p signalling a break to the upside. Further declines could find support at 145p.
HSBC is one of the shares that has moved higher since December, and has held most of its gains, but it is so far unable to break above £6.60, a level that was also a peak at the beginning of December. A move above here would ignite further upside towards £6.90. A pullback towards £6.30 could find support at the rising trendline from the October low.
Compared to the others, Standard Chartered’s uptrend since its October low is a model of elegance. An upward channel is currently in play, with peak in early May hitting the top end of the channel. As well as the lower bound of the channel, the price has found rising support along the middle of the channel. A drop towards £6.20 could provide a good buying opportunity, while further gains target the top end of the channel at £7.50.
This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.
Seize a share opportunity today
Go long or short on thousands of international stocks.
- Increase your market exposure with leverage
- Get spreads from just 0.1% on major global shares
- Trade CFDs straight into order books with direct market access
Live prices on most popular markets