Morgan Stanley-2024 China Equity Strategy Mid-year Outlook Seeking Certain...-108403819.pdf

MMorganStra2024ChinaEquityStrategyMid-yearOutlook|AsiaPacificSeekingCertaintyAmidChangeMorganStanleyAsiaLimited+LauraWangEquityStrategistLaura.Wang@morganstanley.com+8522848-6853MorganStanleyAsia(Singapore)Pte.+JonathanFGarnerEquityStrategistJonathan.Garner@morganstanley.com+656834-8172MorganStanleyAsiaLimited+CatherineChenEquityStrategistCatherine.Chen@morganstanley.com+8523963-4186RaymondKLiuEquityStrategistRaymond.K.Liu@morganstanley.com+8522848-7293Exhibit1:June2025bull/base/bearindextargetsforMorganStanleyChinacoverageequityindices–NoupsidefortheoffshorespaceDec-24Dec-25Dec-26Dec-24Dec-25Dec-2619,1501,9002,0302,2502,0022,1672,2911%7%7%11%9%8%6%6,8007357698407948378921%5%5%9%6%5%7%615.25.76.45.86.67.3-1%9%9%13%14%13%11%3,9003143393773393764137%8%8%11%12%11%10%22,5001,9572,1322,3632,0022,1672,29119%8%9%11%9%8%6%8,10076481589979483789221%7%7%10%6%5%7%755.46.17.05.86.67.321%12%13%15%14%13%11%4,40031934939233937641321%9%10%12%12%11%10%12,2001,7291,7261,7552,0022,1672,291-35%1%0%2%9%8%6%4,600698700714794837892-31%0%0%2%6%5%7%424.74.95.05.86.67.3-31%3%4%3%14%13%11%2,750283295309339376413-24%4%4%5%12%11%10%MSTop-DownEPSYoY%ConsensusEPSForecastYoY%CSI3003,642HangSeng18,8697.0x6.5xMSCIChina628.5x9.0xHSCEI6,70218,86910.0xCSI3003,64212.0xHangSengMSCIChina6211.4xBearCaseHSCEI6,7029.5xCSI3003,64211.0xBullCaseIndexCurrentPriceMSTargetPrice(Jun-25)MSTargetFwdP/EJun-25BaseCaseHSCEI6,7028.5xHangSeng18,8699.0xMSCIChina6210.0xSource:MSCI,IBES,Bloomberg,FactSet,RIMES,MorganStanleyResearchestimates.DataasofMay23,2024.Weexpectarange-boundmarketinnearterm,asrecentrallyhaslargelypricedinthepositivedevelopmentssinceFebruary.Despitepositivepolicypivots,wecautionagainstpersistentdeflationpressureandrisingcomplexityfromtradeprotectionandgeopolitics.PreferA-sharesoveroffshore.leMydskMebusiwhecmpdMvRM.pcReyeMebucdceyMhcdpcRMsRMA,fjI+=M-vRde+dUMYTDChinahasbeenthebestperformingmarketglobally,butwithupsanddowns.Webelievethecurrentindexlevelalreadypricedintheimprovementonmultiplefronts,includingmacrostabilization,flowsandpositioning,andgovernmentpolicypivots.However,deflationarypressureislikelytopersistwithpolicyfocusingmoreonthemanufacturingside,andhousinginventorydigestionfacinguncertainty.GeopoliticalcomplexityislikelytoriseundertradeprotectiondisputesandaheadoftheUSelection.leMFeiceNeMsM&sRmewFvuR"M(s&)edMcyM(v&eMic)eikMcRMdpeM-v(cRmM(vRdpy*M+u&M=uReM,-,.Mds&medyMs&e/M&ey0e-dcNeik/M12/1.-M34156/M7/8--M34156/M71M3w156MsR"M9/2--M34:56MM;v&MM.pcRsMsR"M.=>9--UMMWehaverelativelyflatpricetargetsforJune2025exceptforCSI300,implyingnoupsidefortheoffshorespace.Wehaverevisedupourearningsgrowthforecastfor2024toreflectabetter-than-expectedmacrostabilizationtrendandlesscautiousviewonUSDCNY.Ourbear/bullscenariosforJune2025targetscontinuetorepresentawiderangeofperformanceoutcomes(forMSCIChinafrombear-31%tobull+21%),withthebull/bearskewmoretiltedtowardsthedownsideinabsolutescaleandrelativetoEM.leMs"NcyeM+lMjwyps&eyMhcdpcRM.pcRsMsiiv-sdcvRMandexpectitsoutperformancevs.theoffshorespacetores