🚀 AI-picked stocks soar in May. PRFT is +55%—in just 16 days! Don’t miss June’s top picks.Unlock full list

China stock sentiment improves, but Morgan Stanely recommends caution

Published 04/19/2024, 01:53 AM
© Reuters

Investing.com-- Sentiment towards mainland Chinese stock markets improved over the past week, as hopes of more government stimulus and some positive economic data helped spur gains in regional markets after a middling start to the second quarter. 

China’s blue-chip Shanghai Shenzhen CSI 300 index and the Shanghai Composite index were trading up between 1.4% and 2% this week, outpacing their broader Asian peers. Gains came especially after stronger-than-expected gross domestic product data for the first quarter, which showed strong economic growth in China.

Morgan Stanley analysts noted that while sentiment had improved, risks in Chinese markets still persisted, particularly from more stock market regulation, weakness in the Chinese economy and a soft outlook for earnings. 

To this end, they warned that the recovery in Chinese markets may not sustain, especially with deflationary pressures and broader, geopolitical tensions also stemming sentiment. 

Morgan Stanley analysts recommended stock-picking and more thematic investing to weather further weakness in Chinese stock indexes. Two main themes the analysts cited were reforms in state-owned enterprises, as well as Chinese multinational firms expanding their overseas operations, especially in the face of slowing domestic growth. 

They expected largely range-bound market conditions for China in the near-term, due to persistent deflationary pressures and rising geopolitical uncertainty, especially with regards to increased U.S. regulatory scrutiny of Chinese firms. 

While China's GDP did beat expectations, it still remained relatively subdued, especially when considering the impact of a persistent deflationary trend on the reading. Industrial production and retail sales readings for March also showed that this momentum was already running low, and the Beijing needed to roll out more stimulus measures to support growth.

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.