(Sharecast News) - RBC Capital Markets downgraded HSBC to 'underperform' from 'sector perform' and slashed the price target to 560p from 730p as it highlighted elevated risk from China and a stretched valuation."HSBC's share price has historically been 72% correlated to the GDP growth of the countries in which it operates, it is therefore vulnerable to a fall in GDP in one of its significant geographies."The bank pointed out that HSBC's direct exposure to China is 11% of profits, but this rises to 59% if we include indirect exposure from Hong Kong and Singapore, whose own economies are strongly correlated to Chinese growth, at 77% and 86%, respectively.It noted the fact that the US has imposed $250bn of tariffs on China this year, with the current levy of 10% expected to increase to 25% from the start of 2019 and the potential for an additional $267bn of goods to be subject to the tariff."We expect that this will act as a drag on Chinese GDP in the next couple of years," it said."We expect this slowdown to impact HSBC's Asian loan growth and wealth management revenues and see downside risk to the shares as consensus is already close to management guidance for 2020 return on tangible equity," RBC said, adding that the bank's implied cost of equity is elevated.In addition, RBC argued that the stock's valuation is stretched, with its two-year forward currently trading at a price-to-earnings of 2x higher than the average of the other universal banks.At 1055 BST, the shares were down 0.2% to 605.70p.