BABA, BIDU, SKHY in focus as bank outlooks turn cautious
Morgan Stanley warned Chinese offshore shares could fall another 10%-15% before reaching historical valuation levels. Goldman Sachs cut its 12-month KOSPI…
Morgan Stanley sees Chinese offshore stocks falling another 10%-15%, putting BABA, BIDU, SKHY in focus as investment banks turn more cautious on Asian markets. Goldman Sachs also cut its 12-month target for South Korea’s KOSPI index to 9,000 from 12,000, citing volatility and slowing earnings momentum.
The warnings come as a sharp October selloff in AI-linked shares spreads beyond chipmakers to neocloud operators. Investors are questioning whether spending on AI infrastructure can continue at its current pace.
Shares of Alibaba Group (BABA) and Baidu (BIDU) fell 0.1% and 0.3%, respectively, in overnight trading ahead of Monday, according to the source report. SK Hynix (SKHY), which listed on Nasdaq in July, gained 2.3% after reports of plans for a major dividend payout.
Morgan Stanley sees more downside for Chinese stocks
Chinese offshore shares may fall another 10%-15% to reach historical valuations of about eight times 12-month forward earnings, or the historical bottom, Morgan Stanley said, according to a Bloomberg report. Mainland-listed equities could face 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. They said developments over the past two weeks had further weakened 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, pointing to government support and greater exposure to AI and innovation companies.
The market moves are reflected in exchange-traded funds as well as individual shares. The Direxion Daily South Korea Bull 3X ETF (KORU) declined 0.8%, while the KraneShares CSI China Internet ETF (KWEB) rose 0.6%.
Goldman lowers its KOSPI target
Goldman Sachs lowered its 12-month KOSPI target as pressure builds on South Korean shares. The revised target is 9,000, down from 12,000, according to the source report. Goldman’s current target still implies a 60% upside.
The index has fallen about 40% from its record high, and its price-to-earnings ratio is around 4x, roughly three standard deviations below its historical average, CNBC reported, citing Goldman Sachs. The bank also pointed to opportunities outside memory chips, estimating non-memory stocks—which account for roughly half the index—remain more than 30% undervalued.
The reassessment matters to investors tracking Asian equities because it signals that analysts see risks extending beyond a single market or company. The same AI-linked selloff has hit chipmakers and then spread to neocloud companies, including CoreWeave (CRWV), IREN (IREN) and Nebius Group (NBIS).
Investors have raised concerns about the sustainability of AI infrastructure spending, the capital-intensive cost of expanding data centers and the debt needed to finance that expansion. The source report did not quantify how those concerns might affect future company results.
Stocktwits reported retail sentiment as “neutral” for BABA, “bearish” for BIDU and KWEB, and “bullish” for SKHY and KORU. The next market signals will come as investors weigh the banks’ revised outlooks against corporate updates, including reports of SK Hynix’s planned dividend payout.
Source: finance.yahoo.com
