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Business News/ Markets / Stock Markets/  Morgan Stanley warns against buying the dip in Chinese stocks: Report
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Morgan Stanley warns against buying the dip in Chinese stocks: Report

Morgan Stanley advised investors against buying the dip in Chinese stocks, a recent report by Bloomberg stated. As per the report, the brokerage has warned that foreign funds may keep selling unless there is further policy easing and sentiment is likely to remain fragile.

As per the report, the brokerage has warned that foreign funds may keep selling unless there is further policy easing and sentiment is likely to remain fragile.Premium
As per the report, the brokerage has warned that foreign funds may keep selling unless there is further policy easing and sentiment is likely to remain fragile.

Global brokerage Morgan Stanley has advised investors against buying the dip in Chinese stocks, a recent report by Bloomberg stated. As per the report, the brokerage has warned that foreign funds may keep selling unless there is further policy easing and sentiment is likely to remain fragile.

Quoting Morgan Stanley strategists, the report noted that foreign investors’ outflow from the “so-called A-share market" has entered 'an unprecedented stage', further informing that the cumulative outflow of $22.1 billion from August 7 to October 19 is the largest in Stock Connect’s history.

One must note that the Stock Connect refers to trading links between China and Hong Kong.

"Global funds have been dumping Chinese shares amid rising geopolitical tensions, economic headwinds and an ongoing housing crisis. Efforts by President Xi Jinping’s government to stabilize the property sector and avert deflation have shown little effect.

Morgan Stanley had warned in late July following positive signals from the Poliburo meeting that a follow-through of measures would be required to sustain a recovery in sentiment. They also expressed hesitation to pivot to a more bullish tone after a package of market policy measures," stated the report.

It further pointed out that foreign investors are on track for a third straight month of selling stocks in Shanghai and Shenzhen — the longest streak — after recording the biggest single-day outflow in two months on Thursday.

Chinese stocks dipped below a major psychological level on Friday and the Shanghai Composite Index is poised for its worst week of the year, said the report, highlighting that foreign investors are now less than 70 billion yuan ($9.6 billion) away from making 2023 the first year they sell Chinese shares on a net basis since trading links opened in late 2016.

Morgan Stanley advised that investors need to watch for a fundamental improvement in China’s macro economy and government stimulus measures to restore investor confidence, mentioned the report. Events including the politburo meeting and Third Plenum, and a potential meeting between US President Joe Biden and President Xi Jinping at the APEC Summit next month could be key, it added.

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Published: 20 Oct 2023, 02:24 PM IST
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