The US Republican presidential candidate Trump said that he intends to significantly increase domestic crude oil production, along with concerns about a potential recession in the US, which has raised worries about the oil price trend. However, Morgan Stanley believes that high-yielding Chinese oil stocks are still attractive, as Chinese oil companies are shifting their capital allocation from expanding their scale to increasing shareholder returns. Based on the risk-free interest rate spread for the next 12 months in China and Hong Kong, this will lead to a lower required rate of return in the A-share market, so it is expected that the A-shares of the three major Chinese oil companies will have a 42% premium over the H-shares. Morgan Stanley maintains its bullish outlook on upstream oil stocks, as dividend yields are expected to remain high due to oil prices and earnings support, and there is structural growth potential in natural gas. Morgan Stanley maintains a "hold" rating for PetroChina (00857) and CNOOC (00883), but has lowered the target price for PetroChina by 2% to HK$8.76 and for CNOOC by 4% to HK$21.80. In addition, Morgan Stanley has upgraded its rating on PetroChina (601857.SH) by two levels to "hold," with a target price increase of 40.2% to RMB 11.50, and has also upgraded Sinopec (600028.SH) to "market perform," with a target price of RMB 7.40. However, Sinopec (00386) has been downgraded to "market perform" with a target price decrease of 1.7% to HK$5.63. Morgan Stanley said that in the past, Chinese oil companies tied dividends per share to earnings per share to maintain a stable dividend payout ratio, but believes that the generation of free cash flow and the impact of the balance sheet on dividends will be more important in the future. If one of the three major oil companies pays an attractive dividend to support its market value, as this is a competition, management focus has also shifted to return on equity and market value management, so the other two companies may follow suit. Morgan Stanley also said that in July, the penetration rate of electric vehicles in mainland China reached 50%, combined with the giant planned production capacity of olefins. It is expected that the compound annual growth rate of total capacity in China in the coming years will reach 15%, mainly for low-cost coal and ethane technologies, which may affect the price difference in China's petrochemical cracking, so the outlook for the downstream oil and gas industry chain is bearish.