HSBC (NYSE: HBC) Puts Focus Back on Asia for Growth

Although it has had a competitive advantage over its rivals in Asia, especially China, HSBC (NYSE: HBC) has been slow to take advantage of that and instead has focused on Europe and the United States for growth, to the detriment of the company and its shareholders.

Now that credit demand in Europe has been falling, and of course the mortgage losses in America continuing, the company has been forced to bring its focus back on the Asian market, something it should have never taken its eyes off of. This has been going on for approximately 20 years.

what has been generating the growth and making this the way to go is the emerging middle class in China, which has disposable income and new needs to be met through banking, which not that long ago wasn’t a major factor in their lives. The other secondary factor is the emergence of a growing number of people in China who are wealthy, whom have numerous banking needs as well.

For HSBC, what’s great for them to move forward in the China market is the footprint they already have in the country, which stands at about 1.3 percent of market share, which gives them a tremendous upside for growth, and a good foundation to work from. They are the largest foreign bank in China at this time.

With Asian countries, including the Chinese, liking to work from strong and long-term relationships, HSBC is uniquely positioned to take advantage of that as they’ve had a working presence in the region for well over a century.

When the booming financial markets in the West exploded between 20 and 30 years ago, HSBC took its focus off of their Asian markets and refocused on Europe and America, which they are now sorry they did, as the bubble burst. With the rest of those with large Western exposure, have suffered as a result. HSBC has stated they especially wish that hadn’t acquired Household International for $14.2 billion in 2003, which after close to three years, is still unwinding the bad loans that came with the company.

As part of its Asian strategy, CEO Michael F. Geoghegan will move to Hong Kong in February 2010. He is no stranger to the Asian and Chinese markets, as he’s worked their for approximately 8 years while at HSBC.

The move by Geoghegan is also thought to be a help in its effort to have its shares listed on the Shanghai stock exchange, which would result in them being able to use the currency in the region to aid its expansion plans.

As far as its strategy in the U.S. and how its new focus will affect that, CFO Douglas Flint stated that HSBC is looking to the U.S. to generate about 10 percent of its earnings, with most of that coming from money moving between China and the United States.