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<Research>M Stanley: CN Internet Valuations Still Reasonable; Top Pick TENCENT, Followed by MEITUAN-W/ Trip.com
Recommend 39 Positive 69 Negative 24 |
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China's People's Bank of China (PBOC) meeting and Politburo meeting in late-September suggest a significant policy pivot on the weak economy, Morgan Stanley released a research report saying. However, the National Development and Reform Commission (NDRC) meeting on 8 October and the Ministry of Finance (MOF) meeting on 12 October failed to meet the market's expectations, further reinforcing the broker's view that China's debt, demographics and deflation will continue to face challenges in the future, i.e., a debt-deflation loop, especially if the consumption stimulus failed to meet the standard. The broker believed that China's internet valuations remain reasonable, and thus the potential upside to 2H24-2025 earnings forecasts remain uncertain, even for certain cyclical segments, as it will take time for supportive policies to translate into consumer and corporate confidence. Morgan Stanley cited TENCENT (00700.HK)'s structural tailwinds for games/social (50% of revenue), macro optionality for advertising/ FBS (50% of revenue), market share gain across segments, high earnings visibility and commitment to capital management, and kept TENCENT as its sector top pick, with rating at Overweight. Secondly, Morgan Stanley preferred MEITUAN-W (03690.HK) and Trip.com Group Limited (TCOM.US), both rated at Overweight, due to structural tailwinds, superior growth and benign/ improved competition on consumption recovery. Moreover, the broker maintained a cautious view on Alibaba Group Holding Limited (BABA.US), Baidu, Inc. (BIDU.US), NetEase, Inc. (NTES.US) and Tencent Music Entertainment Group (TME.US), which are all rated at Equalweight. AAStocks Financial News |
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