Get 40% Off
⚠ Earnings Alert! Which stocks are poised to surge?
See the stocks on our ProPicks radar. These strategies gained 19.7% year-to-date.
Unlock full list

HSBC says 'too early to be bullish' on UK stocks, revises sector ratings

Published 21/02/2024, 15:36
Updated 21/02/2024, 15:40
© Reuters. FILE PHOTO: The logo of HSBC is seen on its headquarters in the financial Central district in Hong Kong, China, Aug. 4, 2020. REUTERS/Tyrone Siu/File Photo

(Reuters) - Despite macroeconomic conditions improving, it was "too early to be bullish" on British stocks, HSBC (LON:HSBA) said on Wednesday, due to concerns over a weak earnings outlook and limited room for improvement in valuations.

"We remain cautious on UK equities; whilst macro activity seems to have bottomed, the earnings and valuation picture is not encouraging," HSBC said in a note.

Although British services started the year on a robust footing, and consumer confidence and personal savings seem to be supportive, HSBC strategists believe the improving macro landscape should "feed through to better equity market sentiment, but not until later in the year".

UK corporate earnings should grow "marginally faster" than consensus estimates, HSBC said, warning, however, that further upside would be limited.

Against this backdrop, HSBC downgraded the UK banks sector to "underweight" from "neutral", but upgraded the financial services sector to "overweight" from "underweight" on strong earnings and price dynamics.

The brokerage also revised its recommendations for some consumer-related sub-sectors.

In terms of broader regional markets, HSBC downgraded Italian stocks and double downgraded Spanish equities to "underweight" on weakness in earnings and price momentum.

© Reuters. FILE PHOTO: The logo of HSBC is seen on its headquarters in the financial Central district in Hong Kong, China, Aug. 4, 2020. REUTERS/Tyrone Siu/File Photo

So far this year, Italy's benchmark index has gained 5.3%, while Spain's IBEX 35 index is marginally up just 0.1%. In comparison, the broader STOXX 600 index has risen 2.4% year-to-date.

HSBC upgraded healthcare-heavy Danish equities to "overweight" from "underweight".

Latest comments

market manipulation at its best
Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.