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Morgan Stanley A-Share Market Sentiment and Outlook

Date and Summary

• Date: January 23, 2025
• Authors: Laura Wang and Chloe Liu
• Focus: Update on China A-share sentiment indicators, macroeconomic factors, and investment implications ahead of the Chinese New Year holiday.

Key Sentiment Indicators

• A-share sentiment edged down, with the weighted MSASI falling 15 ppt to 63% and the simple MSASI down 5 ppt to 52% from the January 15 cut-off date.
• Turnover increased marginally in ChiNext and A-shares (+6% and +3% vs. prior week), while Northbound and equity futures turnover remained stable.

Macroeconomic Context

• 4Q GDP beat expectations (5.496% YoY vs. consensus 5.0%), attributed partly to policy-induced stimulus in consumption and capex, reducing urgency for further stimulus.
• Renewed concerns over 10% US tariffs on Chinese goods, set to take effect during CNY holiday (market closed Jan. 28-February 1), may exacerbate profit-taking and reduce risk appetite.

Investment Recommendations

• Market likely range-bound short-term due to ongoing geopolitical risks and tariff concerns, with preferences for A-shares and stable-income dividend stocks, such as insurers.
• Caution advised; monitor annual earnings revisions, export slowdown from tariff uncertainty, and investor decision-making over the holiday.

Regulatory Note

• CSRC's measures viewed as long-term positive but unlikely to drive immediate liquidity shifts. No expected Round 3 stimulus response to tariffs.