Shillong, August 3: Global brokerage firm Morgan Stanley has made notable changes to its ratings for key Asian economies. The firm has upgraded India’s rating to ‘overweight’ while downgrading China to ‘equal-weight.’ These shifts reflect Morgan Stanley’s assessment of the economic prospects for each country in the current landscape.
As per India Today, for India, the upgrade was attributed to several factors. The country’s relative valuations were considered less extreme than in October, and its commitment to reform and macro-stability was seen as supportive of a robust capital expenditure and profit outlook. The report also highlighted the positive trends in foreign direct investment (FDI) and portfolio flows, bolstered by India’s dedication to reforms and macroeconomic stability. Morgan Stanley emphasized India’s potential for sustained superior USD EPS growth compared to other emerging markets, with a youthful demographic profile further driving equity inflows.
On the other hand, Morgan Stanley’s analysts expressed concerns about China’s outlook. The downgrade to an ‘equal-weight’ rating suggests that investors should exercise caution and take profits amid the recent rally driven by government stimulus packages. The analysts pointed out that China’s easing measures are expected to be gradual and may not be sufficient to sustain the gains in the stock market. They also highlighted areas that need significant improvement, such as LGFV debt, the property and labor markets, and geopolitical factors, which could impact the country’s future inflows and re-rating potential.
Additionally, Taiwan also faced a downgrade to an ‘equal-weight’ rating by Morgan Stanley, primarily driven by stretched valuations in the tech sector amid a recent rally.