Morgan Stanley scaled back its estimate of HSBC Holdings' funding need by as much as 26 per cent yesterday, about one month after its initial report sparked a selldown on the stock.
In a rare move, Morgan Stanley issued a report saying it had revised down the capital requirement at HSBC to between US$20 billion and US$35 billion, after 'extended analysis of the group's capital position'.
In a report issued in mid-January, the US brokerage had an estimate of between US$27 billion and US$42 billion and a target price of HK$52, sending the stock into four consecutive days of losses.
Morgan Stanley yesterday said it realised the US$5.8 billion capital shortfall for HSBC's Hong Kong subsidiary operation could be satisfied by the parent group through conversion of preference shares into equity.
Another US$1 billion capital need could be saved by adjusting dividend distributions at the lender's subsidiaries, it added.
Despite the revised estimate, Morgan Stanley keeps its 'underweight' rating and HK$52 target price on the stock. The target was considered by observers as the main reason for the stock to slump to a 10-year low of HK$55 on January 21.
Shares of HSBC slid 2.54 per cent to HK$57.50 yesterday, extending this year's decline to 21.98 per cent.