China stock sell-off could erase another 15% in value, Morgan Stanley says
Weakness in Chinese stocks may persist, with a quick rebound unlikely after a key benchmark slid into bear territory last week, according to global investment banks including Morgan Stanley. China’s onshore and offshore stocks could decline by an additional 10 to 15 per cent before bottoming out, based on valuations during several troughs since 2008, according to Morgan Stanley. Meanwhile, UBS…
Morgan Stanley warns that Chinese stock market weakness may deepen, potentially eroding another 10 to 15 percent from current values. The brokerage cites valuations from previous troughs since 2008 to project a bottoming-out point around 10 times projected earnings for the CSI 300 Index, a key benchmark of China's yuan-denominated stocks.
China's offshore and onshore markets could suffer further declines following a recent 20 percent drop from a June high, with the Star Market 50 gauge losing about 40 percent of its value since its June record high. Analysts attribute the slump to factors including Fed interest rate hikes, tighter liquidity, a deteriorating macro outlook, limited upside for stock flows and positioning, and regulatory concerns over capital flows and investments.
Despite the downturn, Morgan Stanley suggests buying Chinese equities over offshore ones due to state-backed fund support, which has purchased at least 65 billion yuan (US$9.7 billion) worth of ETFs this month, particularly in the technology sector.
Written by urgent.news from SCMP Business's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
This story
This is one outlet's version. Read the fullest account.
