HSBC boosted as Morgan Stanley upgrades to 'overweight'

The US investment bank’s analysts also increased HSBC’s target price to 850p from 745p, saying they were expecting HSBC to have a strong capital surplus over the next three years, yielding as much as 20% during that time.

The impact of Brexit and the uncertainty surrounding the final outcome of the deal with the EU has led to a certain amount of uncertainty for financial services firms, but MS believes that has been overplayed to an extent.

“HSBC still has c.30% of its loan book in the UK ($264bn) and investors are cautious on the UK outlook given uncertainty over Brexit, politics and a squeeze on the consumer from rising inflation,” MS analysts said.

MS said it was expecting HSBC to have a strong capital surplus over the next three years

“We are more optimistic due to the high quality of the book and we think unemployment will remain low.”

The US firm’s research also pointed out expected strength in Hong Kong as boosting income for the bank.

“HSBC is sitting on an underutilised balance sheet in HK with a loan-to-deposit ratio of c.50%, which will benefit as interest rates go up, and we note loan demand is also picking up sharply.”

HSBC led the board on Thursday following the upgrade and increased target price, pushing 4.30% higher to 715.30p as of 1109 BST.