Broker snap: Barclays downgrades StanChart on heightened EM risk

3rd Sep 2013 09:52

Barclays has downgraded banking group Standard Chartered from 'overweight' to 'equalweight', citing its exposure to the emerging markets and growing risks in some geographies. "Although we leave our Standard Chartered earnings estimates unchanged and continue to believe that the shares offer value in the longer term, we see little scope for either earnings upgrades or a re-rating of the shares in the near term," Barclays said.The investment bank has cut its target price for StanChart from 1,700p to 1,530p and has reduced targets for sector peers HSBC, BBVA and Santander by around 3-5% to reflect a higher cost equity for their emerging markets."We see key near-term risks around capital flows with the scale of current account deficits and FX reserves as well as reliance on foreign providers of capital as key indicators."The broker said that longer-term structural challenges include a reliance on commodities or exports to China and rapid banking system expansion."The risks here are more skewed towards Asia and therefore have the greatest impact on Standard Chartered."HSBC's rating was left at 'overweight' while its target price was cut from 850p to 810p. While Barclays said that earnings performance at HSBC will be held back by low interest rates, it said its overall positive stance is due to a "combination of capital return, balance-sheet strength, solid emerging markets businesses and progress on restructuring to drive outperformance".BBVA is rated 'equalweight' while Santander was kept at 'underweight'.BC