BABA, BIDU, SKHY In Focus: Morgan Stanley Sees More Downside In Chinese Stocks, Goldman Sachs Cuts KOSPI Target

(MENAFN- AsiaNet News)

• Morgan Stanley sees Chinese offshore stocks falling another 10%-15% before reaching historical valuation levels.
• Goldman Sachs cut its 12-month KOSPI target, citing volatility and slowing earnings momentum.
• AI-linked stocks, including those of chip firms and neocloud operators, have fallen sharply in October as investors question AI spending sustainability.

Chinese and South Korean stocks could face further pressure as investment banks cut their market outlooks amid intense volatility, particularly the sharp selloff in AI-linked stocks.

In new notes, Morgan Stanley warned that Chinese offshore stocks could fall another 10%-15% before reaching historical valuation levels and Goldman Sachs lowered its 12-month target for South Korea's KOSPI index to 9,000 from 12,000, citing heightened volatility and slowing earnings momentum.

Shares of Chinese tech heavyweights Alibaba Group (BABA) and Baidu (BIDU) fell 0.1% and 0.3%, respectively, in overnight trading ahead of Monday. SK Hynix (SKHY), which listed on Nasdaq in July, gained 2.3% after reports of plans for a major dividend payout. 

The Direxion Daily South Korea Bull 3X ETF (KORU) declined 0.8%, while the KraneShares CSI China Internet ETF (KWEB) rose 0.6%.

Morgan Stanley Sees Downside In Chinese Stocks

Chinese offshore shares may fall another 10%-15% to reach their historical valuation of about eight times 12-month forward earnings, or the historical bottom, Morgan Stanley said, according to a Bloomberg report. Mainland-listed equities could see 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, adding that developments over the past two weeks had further worsened the 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, citing government support and greater exposure to AI and innovation companies.

Goldman Sachs Cuts KOSPI Target As AI Selloff Spreads

Goldman Sachs lowered its 12-month target for South Korea's KOSPI index as the market faces mounting pressure, even though the current target implies a 60% upside, according to a CNBC report.

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.

Goldman also highlighted opportunities beyond memory chips, estimating that non-memory stocks, which account for roughly half the index, remain more than 30% undervalued. 

AI Selloff

The trimming of targets comes amid a brutal month for AI-linked stocks, with the selloff initially hitting chipmakers before spreading to neocloud companies such as CoreWeave (CRWV), IREN (IREN) and Nebius Group (NBIS).

Investors have grown increasingly concerned about the sustainability of AI infrastructure spending, the capital-intensive nature of data center expansion and the debt required to fund it. 

Retail View On Chinese, Korean Equities

On Stocktwits, the retail sentiment was 'neutral' for BABA, 'bearish' for BIDU and KWEB, and 'bullish' for SKHY and KORU. 

“$KORU In late 2026, the KOSPI broke global records. Driven by dramatic downgrades in AI sentiment and heavy retail deleveraging, the index's forward P/E dropped to the 4.0x–4.2x range,” a trader wrote. 

“This represents the lowest valuation of any major trillion-dollar stock market worldwide since trackable data began in 2006,” they added.

For updates and corrections, email newsroom[at]stocktwits[dot]com.

 

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