🥇 First rule of investing? Know when to save! Up to 55% off InvestingPro before BLACK FRIDAYCLAIM SALE

FTSE 100 price target raised at HSBC. Here's the new objective for UK stocks

Published 21/05/2024, 12:20 am
© Reuters.
UK100
-
FTLC
-

HSBC strategists have upgraded the UK market to Overweight from Neutral, highlighting four key reasons behind the move.

Firstly, the FTSE 350 index, which tracks the combined performance of the 350 largest companies listed on the London Stock Exchange (LSE), is trading at a discount relative to its own history and other markets. Moreover, mergers and acquisitions (M&A) could become a stronger catalyst, with total transaction values expected to surpass last year’s figures, the bank notes.

Secondly, higher commodity prices, rising bond yields, and the strength of the USD are also positive tailwinds for performance.

Thirdly, the combined dividend and buyback yield of the UK market significantly exceeds that of other markets, HSBC pointed out. Finally, the long-term structural pressure from UK pension fund selling is over, as these funds have largely depleted their UK equity holdings.

Citing their above-consensus earnings per share (EPS) growth forecasts and recent adjustments to HSBC economists’ industrial production projections, strategists lifted the year-end index target for the FTSE 100 to 8,750 from 8,100, implying a 4% upside from current levels.

However, the investment bank outlined several potential risks to this outlook. For instance, EPS growth in the UK continues to lag behind that of the FTSE Europe ex-UK index. Despite this, HSBC’s EPS growth forecast for the year is higher than consensus estimates, and the Q1 results season has shown a higher level of EPS beats compared to other major European markets, signaling the potential for consensus upgrades.

“Other risks include the fact that current tailwinds in the form of commodity prices, bond yields and exchange rates could turn into headwinds in future while outflows continue for domestic funds, though global fund weightings have improved lately,” they added.

Latest comments

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.