WALL Street brokerages have turned more cautious on Chinese stocks as persistent deflationary pressures and geopolitical tensions cloud the outlook for earnings in the world's second-largest equity market, reports Bloomberg.

Morgan Stanley strategists reduced Chinese equities to a slight underweight within the region, while Goldman Sachs trimmed its index target on the MSCI China Index to reflect a less favourable macro backdrop.

The latest calls represent a rapid turnaround from their upbeat stance on the market following Beijing's stimulus blitz in September.

The MSCI China Index has fallen about 15 per cent from a recent peak as excitement over the prospect of more government support fizzles and Donald Trump's victory in the US election raises concerns over higher tariffs on China.

"We see a low limited chance that China's government will front-load enough fiscal stimulus to target consumption and housing in 2025 due to concerns over moral hazard and a premature transition into a 'welfare state,'" Morgan Stanley strategists including Laura Wang wrote in a note. That presents "even stronger headwinds on corporate earnings and market valuation in the coming months."