Morgan Stanley has increased its targets for Chinese stocks, driven by moderate increases in earnings growth forecasts and higher valuation targets. The U.S. bank noted that earnings results for the fourth quarter of last year from companies tracked by the MSCI China index are showing an 8% net beat, marking the first time in 3.5 years. Chinese stocks have gained momentum this year, with the MSCI China Index rising about 16%, outperforming global peers. This rise is fueled by investor optimism surrounding progress in generative AI and Beijing’s stimulus measures aimed at boosting consumption and supporting the broader economy.
The developments in trade relations between the United States and China remain a key focus for investors. Morgan Stanley also raised its forecast for China’s economic growth in 2025 to 4.5%, up from the previous estimate of 4%. The brokerage revised its yuan predictions to 7.35 per dollar by mid-2025 and 7.50 by the end of this year. Currency strength is seen as an important factor for Chinese equities, especially for the offshore market, as foreign investors’ funding costs are usually in U.S. dollar terms.
However, Morgan Stanley expects the bull market to slow and profit-taking pressures to build as the U.S.-China policy and geopolitical calendar turns active again in the coming weeks.
— news from Reuters.com