M Update China Equity Strategy | Asia PacificA-Share Sentiment Jumped Amid Positive PoliciesMorgan Stanley Asia Limited+Laura WangEquity Strategist Laura.Wang@morganstanley.com +852 2848-6853 Catherine ChenEquity Strategist Catherine.Chen@morganstanley.com +852 3963-4186 Exhibit 1 : MS A-share Sentiment Indicator (MSASI): 51% (weighted), 14ppt increase v.s. January 3115002000250030003500400045005000550060000%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%=51%47% Source: CEIC, Bloomberg, Wind, RIMES, Morgan Stanley Research. Data as of February 7, 2024. Exhibit 2 : MSASI trajectory since January 1, 20192,8003,2003,6004,0004,4004,8005,2005,6006,0000%10%20%30%40%50%60%70%80%90%100%Dec-18Feb-19Apr-19Jun-19Aug-19Oct-19Dec-19Feb-20Apr-20Jun-20Aug-20Oct-20Dec-20Feb-21Apr-21Jun-21Aug-21Oct-21Dec-21Feb-22Apr-22Jun-22Aug-22Oct-22Dec-22Feb-23Apr-23Jun-23Aug-23Oct-23Dec-23Feb-24MSASI (Simple)MSASI (Weighted)MSASI (Simple) CurrentMSASI (Weighted) CurrentCSI 300 (RHS)47%51%MSASI was launched on 11 March, 2019 Source: CEIC, Bloomberg, Wind, RIMES, Morgan Stanley Research. Data as of February 7 2024.Investor sentiment improved upon a series of positive equity market stabilization efforts. Focus on alpha opportunities (earnings certainty, SOE reform) while monitoring further developments. A-share investor sentiment increased meaningfully vs. the prior week: Weighted and simple MSASI increased to 51% and 47%, by 10ppt and 14ppt, respectively. Average daily turnover (ADT) for ChiNext, A-shares, Northbound and equity futures during February 1-7 increased 13% ,10%, 39% and 27%, respectively, vs. the prior cycle; RSI-30D increased 25ppt during the same period. Consensus earnings estimate revisions continued its downward trend, although the speed has lessened. Northbound saw net inflows of US$2.9bn during February 1-7, the second straight week of inflows and US$1.1bn higher than previous week cycle: Meanwhile, Southbound saw net outflows of US$762mn from February 1-7. Northbound and Southbound YTD net inflows stood at US$0.9bn and US$2.1bn, respectively.Market sentiment rose upon a number of positive policy news/announcements, but the deflation concern lingers: On the policy front, 50bp RRR cut came into effect on February 5, providing Rmb1 trillion (US$139 billion) in long-term liquidity to the market. On February 6, the "national team" Central Huijin sent a clear message to stem the recent sell-off through expanding the investment scope of exchange-traded funds (ETFs). One day later, CSRC announced the appointment of Wu Qing as its new chairman, who is a veteran of the financial regulatory system. Despite positive policy signals, macro condition stays lackluster – headline CPI dropped more than market expected to -0.8% yoy in Janu...
