MS cuts Siemens to 'equal-weight' on China and digital headwinds

** Morgan Stanley downgrades German engineering group Siemens SIE to "equal-weight" from "overweight", citing a subdued recovery in its Digital Industries arm and rising competition in China

** Shares in Siemens are down around 3% at 0758 GMT

** The broker expects a slow recovery for Digital Industries into 2026, with its industrial profit forecast sitting 4% below consensus estimates

** "We expect underwhelming 2026 DI guidance, and 1Q26 guidance may point to another back-end loaded year," it says

** MS also warns of intensifying competition in China that makes it challenging to restore historical margins, and anticipates that software deals will pressure capital returns

** The broker says it no longer finds the valuation attractive, noting the stock trades at a 12% premium to peers while its free cash flow yield is just over 4% on 2026 forecasts