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Drop in HSBC and Experian pulls down UK's FTSE
May 7, 2014 / 2:30 PM / 3 years ago

Drop in HSBC and Experian pulls down UK's FTSE

* FTSE 100 down 0.4 pct
    * HSBC takes most points off index after profits fall
    * Cautious outlook hits Experian's shares

    By Sudip Kar-Gupta
    LONDON, May 7 (Reuters) - A fall in the shares of HSBC
 bank and credit-data firm Experian pulled down
Britain's top equity index on Wednesday, adding to the signs of
weakness in corporate earnings that are stalling the market's
rally.
    The blue-chip FTSE 100 index was down by 0.4
percent, or 25.45 points, at 6,773.11 points late in the
session. The index had reached a two-month closing high last
Friday after five straight days of gains.
    A 1.6 percent fall at HSBC took the most points off the
FTSE. The bank recorded a 20 percent drop in first-quarter
profits and said customer activity was muted in April.
 
    Investec analyst Ian Gordon said he preferred rival bank
Standard Chartered to HSBC and that HSBC's return on
equity could remain under pressure in the coming years.
    "We see no easy way out and expect RoE to remain sub-10
percent until 2017," said Gordon, who kept a "hold" rating on
HSBC's shares.
    Experian was the worst-performing FTSE stock in percentage
terms, sliding 7 percent after Chief Executive Don Robert said
growth in the first half of this year could be constrained.
 
    The FTSE hit a peak of 6,867.42 points in late January,
which was close to its highest level since early 2000. It has
since fallen back amid concerns about a slump in emerging
markets and mounting unease about clashes in Ukraine between
Kiev authorities and pro-Moscow militants.
    The FTSE is trading on a 12-month forward price/earnings
ratio of about 13 times, against its five-year average of 11,
Thomson Reuters Datastream shows. Meanwhile, analysts have been
steadily lowering profit forecasts since the start of 2014.
    Peel Hunt equity strategist Ian Williams said he saw little
scope for FTSE gains until at least mid-year. The market may
need more signs of takeover activity to push higher, he said.
    "Valuations have come as far as they can in the short term
purely on an earnings basis, so it does require that corporate
activity to add a bit of upside potential," he said.

 (additional reporting by Tricia Wright; Editing by Larry King)

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