[ET Net News Agency, 11 December 2018] J.P. Morgan said the arrest of Huawei's CFO Meng
Wanzhou has led to concern of escalating trade conflicts and geopolitical risks.
But HSBC Holdings (00005) could be in an uneasy position as the incident unfolds.
The research house said court filings indicate that Meng was arrested on an alleged
misrepresentation made to HSBC executives in Hong Kong. Foreign media reports suggest that
this could have been flagged by Exiger, a third-party entity enlisted by the US Department
of Justice to monitor HSBC's anti-money laundering (AML) work.
JPM believes, if not handled properly, this could lead to a deterioration of trust
between HSBC and its Chinese corporate clients. It noted that Mainland China and Hong
Kong contributed 14.5% and 55.8% respectively of HSBC Group profits in 1H 2018.
If there is a change to the status quo, Standard Chartered (STAN)(02888) could be in a
position to benefit from additional business flow in 2019. JPM expects STAN, along with
other international banks, to closely monitor the ongoing development of the trial.
JPM maintained its "overweight" rating on HSBC, with a target price of HK$88. (KL)