Meituan's stock experienced a sharp decline of 8.28% on Monday, as Morgan Stanley raised concerns about China's macroeconomic conditions and their potential impact on internet sector valuations.
In a research report, Morgan Stanley highlighted China's mounting debt levels, demographic challenges, and deflationary pressures, warning of a potential "debt-deflation loop" if consumption stimulus measures fail to meet expectations. While the broker deemed internet valuations reasonable, it cast uncertainty over near-term earnings forecasts for the second half of 2024 and 2025, even for cyclical segments, as supportive policies may take time to translate into improved consumer and corporate confidence.
Despite rating Meituan as "Overweight" due to its structural tailwinds and superior growth prospects in a consumption recovery, Morgan Stanley's overall caution on China's economy and slower policy impact seems to have weighed on the company's stock price. The broker's concerns over the macroeconomic environment and its potential ripple effects on the internet sector appear to have contributed to the significant drop in Meituan's shares.
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