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After US$382 billion China stock rout, Nomura and Morgan Stanley join Goldman in cutting bullish targets amid economy, earnings hurdles
- Nomura, Morgan Stanley cut their upside targets for MSCI China Index as stocks struggle for near-term catalysts
- Index has lost US$382 billion in market value, after sliding 19 per cent from this year’s peak on January 27
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Nomura and Morgan Stanley are turning less bullish on the outlook for Chinese equities, joining Goldman Sachs in cutting their market valuation and upside targets as the economy muddles through post-pandemic recovery.
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Japan’s biggest brokerage cut its year-end target for MSCI China Index to 67 from 75.3, according to a June 4 report to clients, following several weak economic reports in April and May, intensified competition among tech companies and simmering geopolitical tensions.
Morgan Stanley now expects the MSCI China Index to reach 70 by June 2024 in what appears to be the first dial-back since January. The Wall Street firm had previously targeted the index to reach 80 by end-2023 on the back of reopening optimism.
The two downgrades added to a chorus of downbeat views on China’s recovery momentum since Beijing started abandoning its zero-Covid policy in November. A slump in export demand and China’s spat with the West, from semiconductor to military issues, have prompted money managers to dump Chinese assets, eroding the yuan to near the weakest against the US dollar since November.
“Sentiment towards China remains fragile with investors continuing to be concerned about the sustainability of China recovery, in the absence of more stimulus and property market recovery,” Nomura analysts including Chetan Seth said in the report. “Our targets still suggest China should outperform by the end of this year but near-term catalysts are lacking.”
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