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Morgan Stanley sees Chinese offshore stocks falling another 10%-15% before reaching historical valuation levels.
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Goldman Sachs cut its 12-month KOSPI target, citing volatility and slowing earnings momentum.
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AI-linked stocks, including those of chip firms and neocloud operators, have fallen sharply in October as investors question AI spending sustainability.
Chinese and South Korean stocks could face further pressure as investment banks cut their market outlooks amid intense volatility, particularly the sharp selloff in AI-linked stocks.
In new notes, Morgan Stanley warned that Chinese offshore stocks could fall another 10%-15% before reaching historical valuation levels and Goldman Sachs lowered its 12-month target for South Korea’s KOSPI index to 9,000 from 12,000, citing heightened volatility and slowing earnings momentum.
Shares of Chinese tech heavyweights Alibaba Group (BABA) and Baidu (BIDU) fell 0.1% and 0.3%, respectively, in overnight trading ahead of Monday. SK Hynix (SKHY), which listed on Nasdaq in July, gained 2.3% after reports of plans for a major dividend payout.
The Direxion Daily South Korea Bull 3X ETF (KORU) declined 0.8%, while the KraneShares CSI China Internet ETF (KWEB) rose 0.6%.
Morgan Stanley Sees Downside In Chinese Stocks
Chinese offshore shares may fall another 10%-15% to reach their historical valuation of about eight times 12-month forward earnings, or the historical bottom, Morgan Stanley said, according to a Bloomberg report. Mainland-listed equities could see a similar de-rating to about 10 to 11 times forward earnings.
“Concerns over selling caused by trust tax, pressure on e-commerce, a weakening macro and elevated global market volatility has caused an acceleration of China’s market correction,” the analysts wrote, adding that developments over the past two weeks had further worsened the negative momentum.
China’s onshore equities are already in a bear market, while the global retreat in AI stocks has added to the pressure. Morgan Stanley said it continues to favor mainland-listed stocks, citing government support and greater exposure to AI and innovation companies.
Goldman Sachs Cuts KOSPI Target As AI Selloff Spreads
Goldman Sachs lowered its 12-month target for South Korea’s KOSPI index as the market faces mounting pressure, even though the current target implies a 60% upside, according to a CNBC report.
