Hong Kong: Shares fall for 6th day as Morgan Stanley downgrades China shares

[HONG KONG] Hong Kong's benchmark Hang Seng index fell for the sixth consecutive session on Thursday after Morgan Stanley - usually bullish on China - downgraded the MSCI China Index for the first time in 7-1/2 years, citing valuation concerns.

Morgan Stanley on Thursday demoted MSCI China - which captures mid- and large-cap Chinese companies listed in Hong Kong - to equal-weight from overweight, the first downgrade of the index since November 2008. "Dramatic recent outperformance has led to a deterioration in absolute and relative valuations and a technically overbought situation," Morgan Stanley strategist Jonathan Garner and his team wrote in a research report.

The Hang Seng index fell 1.3 per cent, to 27,289.97 points, while the China Enterprises Index lost 1.6 per cent, to 13,768.47 points.

Investor sentiment was also soured by further losses in mainland China, where stocks fell for a third straight day on fears that regulators were preparing to rein in high levels of margin financing which have fuelled a massive rally.

REUTERS