Morgan Stanley Cuts China Stock Targets, Raises Estimates for Japan’s Topix Gauge

https://finance.yahoo.com/news/morgan-stanley-cuts-china-stock-024723866.html (Bloomberg) -- Morgan Stanley cut its targets for major Chinese stock indexes while raising estimates for Japanese benchmarks, as the performance gap between the two continues to widen. The brokerage lowered the year-end target for the MSCI China Index to 53 from 60 previously, based on slower earnings growth and valuation assumptions. That implies almost no upside for the benchmark for the year. Meanwhile, it lifted projections for the Topix gauge to 2,800 from 2,600. The “divergence in performance year to date reflecting shifts in geopolitical, macro and earnings fundamentals” is driving investor portfolio re-allocation, strategists led by Jonathan Garner wrote in a note Thursday. Chinese equities have lost out to their Japanese peers as global investors continue to seek alternatives to the world’s second-biggest economy. China’s latest attempts to boost the market have done little to sustainably lift sentiment as concerns remain over the nation’s economic recovery and property crisis. Morgan Stanley downgraded Chinese stocks to equal-weight in August, saying it was time to take profit in a rally stirred by government stimulus pledges at the time. The China gauge has lost about 18% since. It further trimmed targets later in the month to reflect mounting growth risks. On the other hand, Japanese benchmarks have hit fresh 34-year highs, and investors are betting the rally can extend as the country emerges from deflation and listed companies’ corporate governance reforms accelerate.