India ‘Overweight’, China ‘Equal Weight’: Morgan Stanley

Morgan Stanley upgrades India shares to "overweight" and downgrades China to "equal weight" amid divergent economic outlooks and challenges in the regions. Taiwan also faces a downgrade due to stretched tech valuations.

Morgan Stanley shifts focus: India gains, China restrained; Taiwan also downgraded amid tech surge

Morgan Stanley has downgraded its rating on Chinese stocks to equal weight’ as the recent rally fueled by government stimulus promises an opportunity for investors to take profits. In contrast, the firm believes that India’s macro indicators remain robust, and its economy is on track to achieve the forecasted 6.2% GDP growth. India’s ability to leverage multipolar world dynamics is seen as a significant advantage, prompting Morgan Stanley to elevate India’s position in their process.

Gradual Measures, Structural Challenges:

The recent boost in Chinese assets comes from Beijing’s promises to spur growth and support the private sector, but Morgan Stanley analysts believe these measures may be implemented gradually and are not enough to sustain gains. Furthermore, market sentiment is shifting to focus on China’s structural challenges, including local government issues and unemployment, without clear solutions.

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China Reforms In Taiwan Tech Concerns:

In terms of re-entry points, Morgan Stanley suggests early October, when top-level party officials could spur reforms in China. A turnaround in earnings growth, a clearer structural outlook, and stabilized geopolitical conditions would offer a better opportunity for upgrades and attract long-term investments

Morgan Stanley downgraded Taiwan to equal weight due to stretched valuations in the tech sector, though they acknowledge it is challenging to predict a market top driven by AI-themed and retail investors.

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Muskan Jha

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