Alarm louder as Morgan Stanley ends bullish bet

Hong Kong

ADD Morgan Stanley and BNP Paribas Investment Partners to the list of forecasters sounding an alarm about China's stock market.

Jonathan Garner, the chief Asia and emerging market strategist at Morgan Stanley, downgraded Chinese stocks for the first time in more than seven years on Thursday, citing the weakest corporate profits since 2009. BNP Paribas has sold some Chinese shares listed in Hong Kong on concern about ballooning mainland margin debt and the growing mismatch between equity prices and a deteriorating economy.

The Hang Seng China Enterprises Index of mainland companies traded in Hong Kong surged to a seven-year high last month amid record turnover in the city, before the advance stalled for the past two weeks. UBS Group AG expects regulators to step…