Morgan Stanley Slashes China Stock Index Targets on Covid Woes
(Bloomberg) -- Morgan Stanley is sticking to its cautious view of Chinese equities, despite a growing list of Wall Street bulls pricing in the nation's pledge to end a regulatory crackdown and stabilize markets.
Lingering risk factors, including a high number of property defaults, more city-wide lockdowns and geopolitical uncertainty, are likely to weaken sentiment and heighten volatility in the near term, strategists including Laura Wang and Jonathan Garner wrote in a note Thursday.
The brokerage slashed price targets for major Chinese stock indexes by as much as 21%, and remained equal-weight on the nation's equities. It now sees potential upsides of 0-5% for these gauges versus 12-30% earlier.
Read: Morgan Stanley Strategist Who Called China Rout Still Won't Buy
More Wall Street strategists have become sanguine on Chinese stocks following a string of interventions by Beijing, which turned the worst selloff since 2008 into a historic surge. Cheap valuations, easier monetary policy and the peaking of Beijing's regulatory crackdown were among reasons for the turnaround.
Still, a spate of negative regulatory developments is keeping traders on edge, reminding them of the policy risks associated with the nation's stocks. Sentiment this week has been dampened by fresh concerns over the possible delisting of Chinese stocks from U.S. exchanges and Beijing's vow for greater scrutiny of online streaming platforms.
| Index | New MS Target | Old MS Target | Change |
|---|---|---|---|
| CSI 300 | 4,460 | 5,300 | -16% |
| MSCI China | 75 | 95 | -21% |
| Hang Seng | 22,600 | 25,000 | -9.6% |
| HSCEI | 7,600 | 9,000 | -16% |
The CSI 300 index capped its worst quarter since September 2015, falling more than 14%, while the Hang Seng Index, which includes the nation's technology giants such as Alibaba Group Holding Ltd. and Tencent Holdings Ltd., is also down 7% this year.
Morgan Stanley continues to prefer onshore over offshore shares, expecting easing measures to kick in once local Covid cases peak later this year, the strategists wrote. Shanghai on Friday shifted its lockdown from the eastern half to the western half of the city amid a resurgence of the virus.
©2022 Bloomberg L.P.
-
Talking Points This Week: Tech Nerves, FII Buying, And A Faraway Banking Shock
The global markets are not shining this Diwali. The exception in the large markets is, India.
-
Midterm Rally Lasted A Day. The Hard Reality Of A Divided US May Last Two Years | Opinion
Between a contested AI boom, a debt ceiling that arrives in 2027 and a president with every incentive to act alone, the next two years may prove more volatile than the first day's rally suggests.
-
Blue Wave Will Derail the AI Trade but Won't Dismantle the AI Era | Unhedged Position
The Democrats' sweep of the US Congress will see politics collide with economic forces both over the long and short term.
-
It's Time To Take The GST Council's Bet On Trust Global
Payment records can prove India's services exports, and clear, proportionate rules can bring foreign digital sellers into the tax net.
-
Opinion | India at 38: From Innovation Overperformer to Innovation Powerhouse
India now has 453 VC-backed deep science startups, 18 of them late-stage, after 117 percent growth since 2020. Laurus Labs, at USD 9.3 billion, is the most valuable deep science company in any middle-income economy outside China.
-
Navigating Energy Crossroads: S Jaishankar's Call For Diversified Supply Chains At G20 Ministerial Meeting
As geopolitical fault lines continue to test maritime trade routes and commodity flows, Jaishankar's message remains pertinent: true economic resilience requires open markets, protected transit lines, and a genuine commitment to multilateral cooperation rather than coercion.
-
Indians Are Travelling, But Not Every Journey Is A Holiday | The Week In Whys
Pilgrims, patients and working women are the real travellers, and the system hasn't quite caught up with them.
-
Getting To Work Costs Women More | The Reason Why
It is not just about women paying more than men. It is about women paying much more in cities than in villages.
-
AI Bias In Investing Cannot Be Eliminated, But It Can Be Governed
Framing is a particularly important example as identical financial information presented in terms of gains rather than losses can lead an LLM to reach a different assessment.
