2023-08-04 06:35:00
Strategists at Morgan Stanley said in a report that China was no longer suitable for overweight, and the bank adjusted its ratings on several emerging markets and Asia-Pacific markets.
Updated August 4, 2023 14:35 CST
Morgan Stanley (Morgan Stanley) strategists said in a report that China is no longer suitable for overweight, and the bank adjusted its ratings on several emerging markets and Asia-Pacific markets.
The investment bank said it was time to revisit ratings following emerging market EEM rebounded 25 percent from its trough in late October. Analysts downgraded China to neutral from overweight and downgraded Australia to underweight.
Analysts at the bank said that China’s domestic demand has not recovered convincingly in the post-epidemic environment, the core inflation rate is close to zero, and the financing burden of local governments is not easy to solve. Additionally, the U.S. is likely to impose more regulations on technology this month.
“Taken together, we would not rule out a return to a more optimistic view of China if policy implementation is more aggressive than in the past and solutions to these structural issues start to fall into place,” they said.
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Morgan Stanley (Morgan Stanley) strategists said in a report that China is no longer suitable for overweight, and the bank adjusted its ratings on several emerging markets and Asia-Pacific markets.
The investment bank said it was time to revisit ratings following emerging market EEM rebounded 25 percent from its trough in late October. Analysts downgraded China to neutral from overweight and downgraded Australia to underweight.
Analysts at the bank said that China’s domestic demand has not recovered convincingly in the post-epidemic environment, the core inflation rate is close to zero, and the financing burden of local governments is not easy to solve. Additionally, the U.S. is likely to impose more regulations on technology this month.
“Taken together, we would not rule out a return to a more optimistic view of China if policy implementation is more aggressive than in the past and solutions to these structural issues start to fall into place,” they said.
The iShares MSCI China ETF (MCHI) has risen 35% from its lows in late October, but is largely flat this year, down 15% since Jan. 27.
Morgan Stanley also downgraded Taiwan from overweight to neutral, saying valuations had returned to mid-cycle levels and market sentiment was no longer depressed. “In our view, the Taiwan market is a structurally bullish scenario, and we are on the sidelines following its recent notable outperformance,” the analyst said.
India, by contrast, was upgraded to overweight from neutral, ranking first out of 28 different markets. Morgan Stanley says India’s structural reforms are paying off, unlocking previously stagnant growth opportunities.
(This article is translated from MarketWatch. MarketWatch is operated by Dow Jones, the parent company of The Wall Street Journal, but MarketWatch is independent of Dow Jones Newswires and The Wall Street Journal.)
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