Shares of Trip.com Group Limited, the Chinese online travel services company, plummeted by 5.05% on Monday, October 15th, amid concerns raised by Morgan Stanley over the challenges facing China's internet sector.
In a research report, Morgan Stanley stated that China's debt, demographics, and deflation will continue to pose challenges, potentially leading to a "debt-deflation loop" if the consumption stimulus fails to meet expectations. The investment bank cited failed expectations from recent government meetings, further reinforcing its cautious view.
While Morgan Stanley maintained an Overweight rating on Trip.com, citing its structural tailwinds and potential for growth on consumption recovery, the overall cautious outlook for China's internet valuations weighed on the stock. The bank noted that it will take time for supportive policies to translate into consumer and corporate confidence, creating uncertainty surrounding near-term earnings forecasts.
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