Shares of Tencent Music Entertainment Group (TME) plummeted over 5% on Monday, following a research report from Morgan Stanley that highlighted various challenges facing China's economy and expressed a cautious view on the music streaming company.
In the report, Morgan Stanley maintained an "Equalweight" rating on TME, indicating a neutral stance on the stock. The research firm cited concerns about China's debt levels, demographic shifts, and potential deflationary pressures, which could weigh on consumer confidence and corporate earnings in the near future.
While Morgan Stanley considered overall valuations in China's internet sector reasonable, the report expressed uncertainty about the potential upside to 2H24-2025 earnings forecasts for certain segments, including those in which TME operates. The broker highlighted the time it may take for supportive policies to translate into a meaningful recovery in consumer and corporate spending.
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