National Grid hit by HSBC downgrade

SHARES in National Grid shed 1.7 per cent yesterday as HSBC downgraded its rating on the power utility to “underweight” from “neutral”, on valuation grounds, underperforming a broadly weaker utilities sector.

HSBC said in a note the networks regulation improvements are now priced in and failure to generate Ofgem savings could dilute long-term returns, while the benefit of the cold winter weather will only be temporary. National Grid’s shares have risen 6.6 per cent in 2011, compared to a 1.6 per cent rise on the FTSE 100, and are hovering near overbought territory on its relative strength index, HSBC said.

National Grid trades on a forward price to earnings ratio of 12.4 times, roughly in line with its sector peers.