Morgan Stanley upgrades India to 'overweight' while downgrading China
Morgan Stanley has upgraded India's shares to 'overweight' and downgraded China's to 'equal weight.' The brokerage firm had previously elevated India from 'underweight' to 'equal weight' in March this year. It attributed India's meteoric rise to strong macro indicators and its ability to leverage multipolar world dynamics. India jumped from sixth to first in Morgan Stanley's ranking courtesy of less extreme relative valuations.
What led to China's downgrade and India's upgrade?
The key factors behind the downgrade of Chinese stocks were China's troubled property sector, geopolitical tensions with the US, delayed earnings recovery, a weaker currency outlook, and local government issues. On the other hand, India has benefited from a reform-oriented and macro-stable agenda that promises robust capital expenditure and profitability outlook. The country has also attracted foreign direct investment and portfolio flows.
China fell to 13th from 3rd in Morgan Stanley's ranking
A slew of promises from the government has given a boost to Chinese assets recently. The bank, however, believes that easing measures will likely come piecemeal, which may not be enough for sustained gains. The country fell from third to thirteenth in Morgan Stanley's developing-nation market allocation framework. Early October could be a reentry point for China, the brokerage firm said.
Underweight, equal weight, and overweight: What these ratings mean
Overweight, underweight, and equal weight are performance predictions. In simple terms, overweight is a buy recommendation for a particular stock, sector, or in this case, a country. On the other hand, underweight is a sell or don't buy recommendation. Here, Morgan Stanley predicts Indian stocks to outperform Chinese stocks. Equal weight means analysts expect the stock/country to perform in line with the market.
