HSBC upgraded as JP Morgan sees interest rate tide turning

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HSBC PLC (LON:HSBA) has been upgraded by analysts at US bank JP Morgan, who see the interest rate environment swinging in its favour.

The US bank says HSBC and also Asia-focused rival Standard Chartered PLC (LON:STAN) are both sensitive to short-term rates in the US and Hong Kong and would benefit from an upward move.

Low rates have affected their net interest margins but the tide might be turning, suggests JPM, following the Federal Reserve’s comments this week.

Both banks have also built up strong capital positions due to restrictions on dividend payouts by the UK regulator but that situation too might be changing.

JPM says the risk on interest rates now is on the upside and with dividend yields on both shares of 4-5%, the risk-reward is more balanced relative to the sector.

HSBC gets an upgrade to a’ neutral’ rating with a 440p price target, while Standard Charted stays at ‘overweight’ with a 640p target.

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