M UpdateChina Equity Strategy | Asia PacificA-Share Sentiment Improved Upon Recent Policy NewsMorgan Stanley Asia Limited+Laura WangEquity Strategist Laura.Wang@morganstanley.com +852 2848-6853 Morgan Stanley Asia (Singapore) Pte.+Jonathan F GarnerEquity Strategist Jonathan.Garner@morganstanley.com +65 6834-8172 Morgan Stanley Asia Limited+Raymond K LiuEquity Strategist Raymond.K.Liu@morganstanley.com +852 2848-7293 Morgan Stanley appreciates your support in the 2024 Institutional Investor All-Asia Research Team Survey. Request your ballot here. Exhibit 1 : MS A-share Sentiment Indicator (MSASI): 41% (weighted), up 6ppt vs. January 1715002000250030003500400045005000550060000%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-24MSASI (Simple)MSASI (Weighted)MSASI (Simple) CurrentMSASI (Weighted) CurrentCSI300 (RHS)75%20%=41%34% Source: CEIC, Bloomberg, Wind, RIMES, Morgan Stanley Research. Data as of January 24, 2024.Sentiment picked up as the market anticipates the reported A-share rescue plan, the announced RRR cut and other policy actions. In our view, more coordinated market stabilization efforts combined with sufficient macro stimulus policy are essential for a sustainable stock market recovery.A-share investor sentiment improved notably vs. the prior week: Weighted and simple MSASI rose 6ppt and 10ppt, to 41% and 34%, respectively. Both average daily turnover (ADT) for ChiNext and A-shares during January 18-24 increased 14% vs. the prior cycle; ADT for Northbound and equity futures during January 18-24 were up even more, by 31% and 50%, respectively, vs. the prior cycle. RSI-30D increased 18ppt during the same period. Downward consensus earnings estimate revisions seem to have to re-accelerated, however, as we approach the annual results season. Northbound saw net outflows of US$126mn during January 18-24, a continuation of the outflow cycle since the start of August, despite a temporary halt in late Dec-23: Northbound MTD total net outflows reached US$3.7bn. Southbound saw net outflows of US$211mn from January 18-24, the first week of net outflows in 2024. Southbound MTD net inflows stood at US$2.4bn.Market sentiment rose upon a number of positive policy news/announcements: PBoC unexpectedly announced a 50bp RRR cut and 25bp targeted cuts on relending and rediscount rates on January 25. Meanwhile, on January 24, PBoC and NFRA announced an unexpected easing on the usage of operating loans to quality developers for refinancing corporate-level loans and bonds. POEs and semi-SOEs are seen as major beneficiaries given their narrowed refinancing channels. Bloomberg before also reported a potential Rmb2trn rescue market stabilization fund package on January 23 (see our thoughts here). Continued in the following sectionMorgan Stanley does and seeks to do business with compa...
