Shares of HSBC Holdings, the world's fourth-largest lender, fell yesterday to an almost three-month low amid concerns its US unit will have to make larger loan-loss provisions due to the subprime crisis.
The stock fell to HK$136 at one point after Morgan Stanley downgraded the stock from 'overweight' to 'equal weight' and cut its target to HK$131 from HK$160. It ended the day at HK$137.10, down 2.77 per cent.
'The stock will still be clouded by subprime issues in the near term, though selling pressure could ease a bit at the HK$130 level,' said Ben Kwong Man-bun, the chief operating officer at KGI Securities.
Analysts expected HSBC Finance, which is scheduled to announce its third-quarter results tomorrow, will post a significant fall in profits or even show a loss.
Morgan Stanley said HSBC's Asia business should be strong but its US operations were likely to worsen significantly. 'We expect HSBC Finance's bad debts to increase from US$7 billion in 2006 to US$10 billion in 2007 and US$12.8 billion in 2008,' the US brokerage said in a report.