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China bank investors, take note.
Morgan Stanley has downgraded its recommendations on shares of China's big-four state-owned lenders, warning that Beijing's "resumption of less commercially viable credit policy” to support economic growth could lead bad loans to soar and eat into banks' profit.
The brokerage giant lowered Shanghai- and Hong Kong-listed shares of Bank of China and Agricultural Bank of China, as well as A-shares of Industrial and Commercial Bank of China and China Construction Bank, to "equal weight" from "overweight," it said in an analyst report.
"Overweight” suggests the stock is expected to outperform its peers and is often seen as a recommendation to buy, whereas “equal weight” indicates the stock’s performance is projected to be in line with its sector. An “underweight” rating means the stock's total return is expected to lag behind the industry average.
Morgan Stanley also lowered its rating on Hong Kong-traded H-shares of Chongqing Rural Commercial Bank and Bank of Chongqing to "neutral" from "buy," citing similar concerns.