Morgan Stanley has recommended that investors rethink their preference for Chinese stocks listed on the mainland in favor of those traded internationally. According to a Bloomberg (gate) report, this change in outlook is driven by shifts in the key factors that have traditionally made onshore Chinese shares attractive.
Morgan Stanley says "The two biggest supporting factors have shifted significantly over the past couple of months":
1. A decrease in purchasing activity by state-backed investors, often referred to as the "national team"
- Morgan Stanley analysts note that state-linked funds, which have been instrumental in supporting domestic stock prices through substantial share purchases, are likely to take an "interim break."
2. Reduced likelihood of yuan depreciation
- Morgan Stanley revised its outlook on the yuan exchange rate, now projecting stability around 7.1 towards the end of the year
- a weaker yuan could potentially boost exports and benefit the broader economy, it would also decrease the value of Chinese stocks in foreign currency terms
