LONDON (Reuters) - HSBC on Monday upgraded British stocks to overweight from neutral, citing cheap valuations, higher commodity pries and bond yields, UK shares' dividend yields and the end of the "long term structural overhang" of pension fund selling.

They raised their target price for the FTSE 100 blue chip index under their base case scenario to 8,750 points, which implies a 4% increase from current levels.

On Monday the FTSE 100 was up 0.1%, just shy of Wednesday's all-time high, and the midcap FTSE 250 was up 0.6% at a two-year peak.

(Reporting by Alun John; Editing by Amanda Cooper)