Banking giant HSBC had its rating on Monday upgraded to 'equalweight' from 'underweight' by Morgan Stanley.Analysts at the US investment bank said the reason behind the rating upgrade is because HSBC's stock has underperformed the Stoxx 600 banks index by around 17% year-to-date.They said that challenges for HSBC remain on revenue and capital but now that consensus 2016 EPS estimates have been cut by around 25% from peak, "management has rebased return-on-equity targets lower and capital assumptions higher (and) we see less alpha in the underweight stance here."Valuation is more appealing relative to European banks after underperformance by the stock, said the analysts, noting that the HSBC's dividend yield of around 6% should appeal to yield-hungry investors and looks sustainable."With (operations in) Brazil, Mexico, US and Turkey being worked on over the next 12-24 months, we expect either a recovery in returns or more radical solutions, for example, disposals/exits for these units," added Morgan Stanley analysts.Furthermore, they said US rate hikes are a potential benefit to HSBC. "With around $400bn of surplus deposits, an extra 1% yield on this float could add around $4bn to net interest income, or around 6% of 2014 revenues or around 18% of 2014 pretax profit, though the impact on asset quality could offset to a degree," they added.Morgan Stanley maintained its 600p target price on HSBC stock.