Morgan Stanley-China Equity Strategy A-Share Sentiment Fell Sharply amid T...-108461794.pdf

MMorganChinaEquityStrategy|AsiaPacificA-ShareSentimentFellSharplyamidTradingVolumeDeclineMorganStanleyAsiaLimited+LauraWangEquityStrategistLaura.Wang@morganstanley.com+8522848-6853MorganStanleyAsia(Singapore)Pte.+JonathanFGarnerEquityStrategistJonathan.Garner@morganstanley.com+656834-8172MorganStanleyAsiaLimited+CatherineChenEquityStrategistCatherine.Chen@morganstanley.com+8523963-4186Exhibit1:MSA-shareSentimentIndicator(MSASI):37%(weighted),down5pptvs.May2215002000250030003500400045005000550060000%10%20%30%40%50%60%70%80%90%100%Jan-14Jun-14Nov-14Apr-15Sep-15Feb-16Jul-16Dec-16May-17Oct-17Mar-18Aug-18Jan-19Jun-19Nov-19Apr-20Sep-20Feb-21Jul-21Dec-21May-22Oct-22Mar-23Aug-23Jan-24Jun-24MSASI(Simple)MSASI(Weighted)MSASI(Simple)CurrentMSASI(Weighted)CurrentCSI300(RHS)75%20%=37%25%Source:CEIC,Bloomberg,Wind,RIMES,MorganStanleyResearch.DataasofMay29,2024.Thisweek"ssentimentdeclinewaslikelydrivenbyprofit-takingfollowingoffshoremarketweakness,andpotentialconcernsovergeopoliticaluncertainty.Arange-boundmarketismorelikelycurrently;A-sharesarebetterpositionedwithgovernmentstabilizationsupport.StleydMsSkSbMuiwMhdtcmpdwMsSkSbMvRpmMwd.Adu,dwMfeepjMpRMIf+MuiwM=-+jMAd,ed.ptUdyFjMU,NMpmdMeAtRAM.&pR""MwupdM(suFMII)*Tradingvolumeshoweddecline:averagedailyturnover(ADT)forChiNext,A-shares,equityfutures,andNorthboundduringMay23-29decreased2%,12%,10%,and13%,respectively,vs.thepriorcycle(May16-22).RSI-30Ddecreased6pptduringthesamecycle.Consensusearningsestimaterevisionbreadthstayedonitsacceleratedpath,whichstartedattheendofFebruary.+RApmvR&iwMmuwMidpMR&p"yRh,MR"MoS,-f-liMw&AticMsuFMI=.I/jMhmtydMSR&pmvR&iwMidpMti"yRh,M.Ripti&dwM"RAMpmdM01pmM.Ri,d.&ptUdMhdd2M(,ti.dM3dvA&uAFM-)*MNorthboundMTDnetinflowsreachedUS$2.2bn,withYTDnetinflowsretreatingbacktoUS$12.6bn.SouthboundnetinflowswereUS$2.7bnduringMay23-29,withYTDandMTDnetinflowshittingUS$34.4bnandUS$7.2bn,respectively.suA2dpM,diptldipM"dyyMvu.2MpRMltw.4ui&uAFMydUdy,jMhmdiMpmdMluA2dpMhu,MuAc&uvyFMupMuMUdAFMvduAt,mMeRtipM"u.ticM,tcit"t.uipM,dyyticMeAd,,&Ad*MFrankly,thelevelofdropinthesentimentindicatorreadingissurprising–welastsawsimilarcautiousreadingsbackinmid-January,whenthemarketwasmuchmoreconcernedaboutdeflationgettingmoreentrenchedandtherewasfundoutflow/sellingpressureasaresult.However,themacrosituationhasnotparticularlyworsenedcomparedtothatperiod.OureconomicsteamexpectsNBSmanufacturingPMItoreach50.5inMay(vs.50.4inApril),stayinginexpansionaryterritoryforthethirdconsecutivemonth.Wedoexpectthedeflationarypressuretolingerforlongerandbullandbearargumentswillstillremainashousingandconsumptionriskspersistintheeconomy.Morespecificallyforthisweek,investorsmaywanttotakeprofit/getbacktothesidelinesfollowingtherecentweaknessintheHongKongandoffshoremarkets.Moreover,themilitaryexerciselastweekmayalsohavetriggeredsomeriskaversionsentimentregardingpotentialgeopoliticaluncertainty.5dM,puFMd6&uy.hdtcmpMRiM7mtid,dMd6&tptd,MhtpmtiMuiM8s9k:;4M.Ripd;pMuiwMAdlutiMlRAdMeR,tptUdMRiMk.,muAd,MU,NMR"",mRAd*MWebelievethecurrentindexlevelshavealrea