Leading US investment bank Morgan Stanley has once again encouraged investors with a positive assessment of the Chinese stock market. On Wednesday, it raised the target values of key Chinese indices for the second time this year while improving the outlook for the Chinese economy.
Specific index adjustments
The bank has raised the annual target values for major Chinese stock indices:
- Hong Kong’s benchmark Hang Seng Index at 25,800 points
- Hong Kong Hang Seng China Enterprises Index at 9,500 points
- MSCI China index at 83 points
- Chinese blue-chip index CSI300 at 4,220 points
Reasons for optimism
According to Morgan Stanley, the main reason for the increase in targets is positive signals from corporate results. Companies tracked by the MSCI China index reported exceptionally strong results for the fourth quarter of last year, with total net profit beating expectations by 8%, the first such case in 3.5 years.
Chinese stocks have already seen significant growth this year. The MSCI China Index is up 16%, outperforming global peers. This rise is mainly driven by two factors: advances in generative artificial intelligence and government stimulus measures aimed at boosting consumption.
Economic outlook
Morgan Stanley has also raised its forecast for China’s economic growth in 2025 to 4.5% from the previous 4%. The bank has also revised its forecast for the yuan – it expects it to be worth $7.35 per yuan in mid-2025 and $7.50 by the end of the year.
Analysts stress the importance of the exchange rate for foreign investors. A relatively stronger currency can be a positive catalyst for asset allocation.
Risks and outlooks
Further developments will depend on geopolitical developments, especially the relations between the US and China. Goldman Sachs, another major investment bank, shares the optimism about Chinese equities, but also warns of a possible market slowdown in the coming weeks due to the active political calendar.
Despite the partial risks, Morgan Stanley’s overall outlook is positive and boosts foreign investors’ confidence in the Chinese stock market.
