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| HSI1 | 23,211.81 | 0.00 | -- |
| HSCEI1 | 7,802.09 | 0.00 | -- |
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2026-10-26 13:10:57 Morgan Stanley released a research report stating that China's stock market correction has accelerated due to factors including concerns over trust tax-related selling, pressure on e-commerce, weakening macro conditions and heightened global market volatility. Historical valuation trough levels suggest there may still be another 10% to 15% downside, but the broker remains positive on A-shares as signs of state-backed funds stabilizing the market are increasing. The broker noted that since early August, China's stock market has continued to undergo a substantial correction, with momentum accelerating from mid-October. Year to date, MSCI China, the HSI and the CSI 300 have fallen 20.3%, 9.5% and 11.4% respectively; since early August, they have declined 12.8%, 10.4% and 10.6% respectively; and since October 8, they have dropped 5.7%, 2.5% and 4.8% respectively. Last Thursday (22nd), the HSTECH plunged 5% in a single day, marking the biggest one-day decline this year. Regarding the sharp decline in Hong Kong stocks last Thursday, although Morgan Stanley does not believe the heavy selling that day was driven by related entities or individuals urgently raising cash for tax settlement payments, as any such selling would likely have been conducted earlier to meet the deadline, the broker acknowledged that the broader market may not be fully familiar with the details and timeline of the event. As a result, the market may have mistakenly believed it would trigger a wave of panic selling. The broker added that recent corrections in Hong Kong stocks were mainly driven by the October 22 deadline for offshore trust individual income tax filings and payments, regulators summoning major e-commerce platforms and requesting improvements in service and product quality, bearish domestic macro sentiment, and uncertainties in the US and global markets related to oil prices, yields, inflation and midterm elections. A-shares were dragged down by factors including higher correlation with US AI and capital expenditure themes, extremely weak macro and consumption momentum, and liquidity concerns arising from large IPOs. For offshore markets, historical valuation ranges indicate that the HSI and MSCI China may still face about 10% to 15% further downside before reaching trough levels of around 8x 12-month forward P/E ratios. For A-shares, the historical trough valuation for the CSI 300 is around 10x to 11x 12-month forward P/E ratios. The broker maintained its preference for A-shares over offshore markets because the ability of state-backed funds to stabilize the market is clearer, while A-shares have higher concentration in high-income and earnings growth sectors such as AI, hard technology and innovation. Citing Bloomberg data, the broker said state-backed funds purchased about USD15 billion during October 9 to 20, with buying skewed toward STAR 50 and ChiNext in response to sell-offs in technology growth stocks. As of October 21, the broker's A-share sentiment indicator had remained below the 22% technical rebound signal level for about one month, and historically meaningful index rebounds often emerged within one to two months thereafter. The broker believes Beijing is attempting to alter marginal supply-demand dynamics and establish a market bottom without aggressive intervention. Based on historical experience, signs of stabilization in the A-share market could become more evident within one to two months. AASTOCKS Financial News Website: www.aastocks.com This article was automatically translated by AI, the Chinese version should be considered the authoritative version. AASTOCKS.com Limited does not guarantee its accuracy or completeness and accepts no liability for any damages or losses arising from the use of this translation. | |