Morgan Stanley Remains Overweight in Japan and India, Cuts China Outlook Further By Investing.com

Investing.com – Morgan Stanley said it remained overweight on Japanese and Indian stock markets, while further cutting its targets for China amid few signs of improving growth in Asia’s largest economy.

The brokerage said it continued to favor Japan over emerging markets in Asia, saying that while it had slightly cut its year-end targets for Japanese indices, it still expected a 14% rise from current levels, especially for the index.

MS expects an improvement in Japanese inflation, while strong earnings growth is also expected to continue on the back of improved corporate reforms.

Japanese markets posted sharp losses in early August as the Bank of Japan’s bullish signals largely undermined yen trading. Both and the TOPIX crashed in a bear market, although they have since recovered much of those losses.

MS expects a broader improvement in risk appetite with lower global interest rate cuts and sees most developed economies on track for a soft landing. But the brokerage recommended reducing exposure to Asian chip stocks and shifting more to domestic and defensive sectors.

MS said it sees a “compelling structural opportunity” in Indian markets, citing strong gross domestic product growth, relative stability of the rupee and an outpacing of GDP in company profits.

The brokerage also cited “secular growth” in the Indian economy and improving domestic retail spending, both key drivers of Indian stocks.

Indices and indices neared record highs, mostly off a recent rout in global stock markets.

MS cuts China targets due to macroeconomic concerns, weaker fund flows

The MS downgraded its 2024 targets across the board for Chinese indices, including , and .

The brokerage said it saw lower earnings growth and ratings for Chinese stocks in 2024 and 2025, especially as GDP trended below the government’s annual target of 5 percent in the June quarter.

“Even with further policy easing, which could lead to a modest pick-up in growth in the fourth quarter, our economics team still believes full-year growth could miss the 5% target,” MS analysts said in a note.

The brokerage said local deflation persisted longer than expected, while a slowdown in the housing market continued to weigh on demand.