Investors should consider buying into the pullback in Chinese stocks, even as a rotation from household savings to equities slows and the world’s two largest economies are locked in a renewed trade dispute, according to Morgan Stanley.
A 10 to 15 per cent correction in the MSCI China Index would present a buying opportunity, especially amid signs that a meeting between Chinese President Xi Jinping and his US counterpart Donald Trump would still take place by the end of the month, as well as a potential upgrade of earnings forecasts, analysts led by Laura Wang at the American investment bank wrote in a research note on Thursday.
“We continue to consider such a tactical truce as our base case because we believe that both countries still rely on the other side for critical inputs, namely tech versus rare earths, as they engage in the current stage of competition, which focuses on artificial intelligence and technology,” the report said.
The migration to stocks from household savings, however, has shown signs of moderating, with the decent gains in equities prompting some investors to take profits.
