As I revealed yesterday, the FTSE 100 index has fallen almost a fifth (18.9%) over the past 12 months and by a similar percentage (19.2%) over the past six months. Thus, 2020 so far hasn’t been a great year for UK investors.
Coronavirus crashes the FTSE 100
Obviously, the cause of this latest FTSE 100 crash is Covid-19, also known as the coronavirus. But do you want to hear something crazy?
Today, the FTSE 100 hovers around 6,116 points, the same level as its closing high on 17 July 1998 (6,116.8, exactly). And on 20 July 1998, the FTSE 100 closed at 6,179, which is actually 1% higher than as I write.
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Thus, the FTSE 100 is slightly lower today than it was roughly 23 years ago, when Jamiroquai‘s Deeper Underground was #1 in the singles chart. That means zero capital growth for the FTSE 100 over the best part of a quarter-century. Ouch! But of course, that does not take into account all of the dividends that have been paid out since.
This FTSE 100 share is in free-fall
Anyway, talking of zero capital growth, shares in FTSE 100 colossus HSBC Holdings (LSE: HSBA) are lower today than at any point this millennium.
Remember the global financial crisis of 2007/09, when banks in Europe and the US were collapsing almost daily? HSBC’s share price is considerably lower today than it was even at the market bottom in spring 2009.
HSBC has lost £67bn in 12 months
There seems to be no floor whatsoever to HSBC’s share price this month. Every time I check (and always after I recommend buying them), HSBC shares keep heading south. I considered them cheap at £4 and a real bargain at £3.70. Now they trade just above £3.54. Wow.
Sadly, HSBC shareholders have lost almost half their money over the past 12 months, as the share price has crashed by 46.5%. On 20 July 2019, HSBC’s shares were riding high at 671.4p, so this near-halving has costs its shareholders £66.6bn, which is a staggering loss of value.
But HSBC is a FTSE 100 survivor
That’s the bad news. Yet despite this £66.6bn collapse, HSBC is still worth over £74bn today. This makes it #7 in the FTSE 100 by size and still a global force to be reckoned with. Judging by its share price, HSBC is on its knees.
Here’s the thing: HSBC survived and thrived after the dotcom boom and bust that played out from 1997 to 2003. It survived and thrived after the global financial crisis of 2007/09. And it will survive and thrive long after Covid-19 is a distant memory.
I view HSBC shares as cheap as chips
For now, it’s impossible to value HSBC shares using conventional metrics. How can we calculate a price-to-earnings ratio, when we have no idea what 2020 earnings (probably negative) will be? Likewise, this FTSE 100 stalwart last paid a dividend on 20 November 2019. It has since suspended these quarterly cash payouts, so there is no dividend yield.
For sure, HSBC’s global lending exposure will cost it tens of billions of dollars in loan defaults and losses. But its fortress-like balance sheet will absorb these losses and move on, just as happened in 2009.
One final thought relating to my comment about dividends earlier. HSBC’s last four quarterly dividends totalled 39.6p – an 11.2% dividend yield at today’s price. I don’t expect HSBC’s future dividends to reach this level for years, but I can see it paying, say, 30p a share in future yearly dividends. That’s an 8.5% dividend yield, which is why I’d happily buy and hold this FTSE 100 share forever.
