Morgan Stanley has shifted its stance on Chinese stocks, projecting a sustainable rise driven by advancements in artificial intelligence. The investment bank's chief China equity strategist, Laura Wang, and her team have upgraded the MSCI China Index rating to "Equal-weight," forecasting the index to reach 77 points by the end of 2025, a significant increase from the previous target of 63 points. This suggests a 4% rise from its recent closing price.
The MSCI China Index recently entered a technical bull market. Morgan Stanley also raised its year-end targets for the Hang Seng China Enterprises Index from 6,970 to 8,600 points and for the Hang Seng Index from 19,400 to 24,000 points, while maintaining the target for the CSI 300 Index at 4,200 points.
This upgrade marks a notable shift for Morgan Stanley, which had been cautious about Chinese stocks. The change reflects a broader positive sentiment among global institutional investors towards the Chinese market. Factors contributing to this outlook include corporate efforts to boost stock prices, regulatory shifts, and China's AI capabilities.
Wang noted that global investors have been underweight in China's tech sectors, but advancements like DeepSeek could prompt a reevaluation. China's strong engineering talent, data availability, and robust e-commerce ecosystem, along with potential government support, are expected to accelerate AI adoption.
Despite macroeconomic challenges affecting traditional sectors, the tech sector is expected to outperform in the near term. Wall Street's optimism about Chinese assets is growing, with several investment banks, including Goldman Sachs, expressing a positive outlook on China's tech advancements.
