Morgan Stanley is betting on a number of Chinese stocks – such as technology and materials companies – to weather what is expected to be a period of high market volatility. Investment firms prefer mainland Chinese stocks to those listed overseas, equity strategist Laura Wang said in an August 15 report on the bank’s position on the Chinese stock market. Country in the third quarter. She said the mainland China CSI 300 index has outperformed the MSCI China stock index by 20 percentage points since mid-November. MSCI China’s biggest holdings are listed Chinese stocks. listed mainly in Hong Kong, such as Tencent and Alibaba. Wang noted how the MSCI China index is most sensitive to sectors affected by regulatory uncertainty and is experiencing the longest bear market in its 20-year history. She expects a slump in the property market, downward earnings corrections, a potential Covid outbreak and uncertainty surrounding US-China tensions likely to increase market volatility. During that time, she said, the company recommends maintaining excess weight for materials companies. “We also like information technology, technology with continuity policy, and Gadgets for defense,” says Wang. For each of those three sectors, CNBC has selected stocks on the bank’s China/Hong Kong-focused list with the best upside potential against undisclosed price targets since. 11 August, according to Morgan Stanley analysts. All three were rated as overweight by the investment bank. Technology: Glodon Growth: 59.8% Glodon is a construction software company with products including construction design and cost estimation tools. The company claims net profit attributable to shareholders doubled last year to 661 million yuan ($97.3 million). Shares traded in Shenzhen are down more than 10% in the past six months, but have been up for the past three months. Materials: Ganfeng Lithium Growth: 58.8% Ganfeng Lithium is a giant supplier of lithium for electric car batteries. The company said net profit attributable to shareholders jumped 410% last year to 5.23 billion yuan ($770.21 million). However, the stock has fallen sharply this year. The company’s Hong Kong-listed shares have fallen about 24% over the past three months. Ganfeng and Glodon have both outperformed the MSCI China Index since Morgan Stanley added them to its focus list, the bank reports. Utilities: Kunlun Energy Potential growth: 47.3% Kunlun Energy focuses on natural gas processing and transportation. The company is controlled by the state-owned China National Petroleum Corporation. Kunlun said profit contributed by shareholders jumped nearly 280% to 23.02 billion yuan last year. The company’s Hong Kong-traded shares are down about 12% over the past three months. – Michael Bloom of CNBC contributed to this report.
