Broker snap: HSBC upgraded on Asian position

20th Apr 2011 14:29

Morgan Stanley has upgraded banking giant HSBC to 'overweight', from 'equal-weight', saying that the group's performance could improve "meaningfully from 2010" as a result of its position in the Asian market.The broker believes that the market is missing the turnaround in Asia because after more than five years gaining market share across the continent (especially Hong Kong), HSBC is better placed than other large Asian peers on deposits and capital, which it believes will help it to keep gaining share.Furthermore, "Inflation is running above target in the UK, and the market expects rate rises by the fourth quarter of 2011. US rate may not increase until the first quarter of 2012. As a large deposit taker, HSBC is leveraged to rate rises in the UK, US and Asia," said Morgan Stanley.The broker is predicting a 16% rise in revenues in 2011, but notes that the increase could be even higher if net interest margin pressures subside.Morgan Stanley now sees risk 'to the upside', driven by the Asian performance, cost control, lower impairments, and by leveraging its balance sheet and funding advantage to increase loan growth and gain market share.The price target is raised to 800p, from 775p previously.---bc