There’s a ‘high degree of uncertainty’ on impact of China focus on data security
Morgan Stanley is urging investors to be cautious on Chinese stocks, given the country’s recent regulatory crackdown on its internet companies.

The investment bank reiterated its call to downgrade Chinese stocks under the MSCI China index to equal weight, which means they are expected to perform equal to other stocks in other emerging markets. That call was first made in January this year.

The MSCI China stocks include both A-shares listed on the mainland, and offshore shares listed in Hong Kong.

Jonathan Garner, chief Asia and emerging market equity strategist at Morgan Stanley explained why the bank has repeated that call. “What we are seeing, I think, is that the anti-trust regulation is proving sort of much deeper and more long lasting than we had thought,” he told CNBC’s “Squawk Box Asia” on Tuesday.

Regulatory fears
Fears over regulatory scrutiny on Chinese tech companies are growing again, after China announced a cybersecurity review of ride-hailing app Didi in early July.

Authorities ordered app stores to remove Didi’s app for download, just days after the Chinese company launched its IPO in the U.S. Chinese regulators also alleged that Didi had illegally collected users’ personal data.

Since then, China has opened a cybersecurity review into three more Chinese companies listed in the U.S.