Sluggish consumption and weak corporate profits Morgan Stanley: China's stock market will fall another 10% to 15%

Morgan Stanley said that China's stock market will fall further before valuations hit a bottom as weak overall economic and consumption momentum continue to weigh on market sentiment. (Reuters photo)

"Bloomberg" reported that Morgan Stanley said that as weak overall economic and consumption momentum continues to weigh on market sentiment, China's stock market will fall further before valuations hit a bottom.

Morgan Stanley analyst Wang Ying and others issued a report stating that Chinese stocks listed in Hong Kong may fall by 10% to 15% before they fall to historical valuation levels, which is about 8 times the expected price-to-earnings ratio. The valuations of domestically listed stocks in China may also see a similar downward revision, to about 10 to 11 times expected price-to-earnings ratios.

The report reads: "Sell-off concerns triggered by the trust tax, pressure on e-commerce, overall economic weakness, and increased global market volatility have led to an accelerated correction in China's stock market. Other developments in the past two weeks have further intensified the decline."

China's domestic stock market is in a bear market, and continued sluggish consumption and weakening policy support continue to cast a shadow on China's economic growth prospects. The pullback in global artificial intelligence (AI) concept stocks has added to the pressure, while the Hong Kong stock market remains vulnerable to fluctuations in global bond yields and expectations for the direction of U.S. Federal Reserve (Fed) interest rates.

Hong Kong's "South China Morning Post" reported that Shenwan Hongyuan Group pointed out that weak corporate profits are becoming another factor dragging down China's stock market. All walks of life, including consumer goods, real estate and green energy, are facing pressure due to weak demand or overcapacity.

Shen Wanhongyuan said that the profit growth of China's listed companies in the first three quarters of this year slowed down compared with the first half of the year, but did not give specific data.

According to data released by the National Bureau of Statistics of China, profits of Chinese industrial companies increased by 15.7% in the first eight months of this year, a growth rate that slowed down from 18.7% in the first half of the year.

Shaun Rein, general manager of China Market Research Group (CMRG), previously said that China's stock market is expected to face further selling pressure amid geopolitical uncertainty, concerns about a bubble in artificial intelligence (AI), and deteriorating consumer confidence.

Lei Xiaoshan pointed out that China's stock market is dominated by retail investors, and volatility may intensify as retail investors tend to accelerate their exit from the stock market during periods of uncertainty.