China Equity Strategy A-Share Sentiment Fell as Trading Vol...-110301018

M Update China Equity Strategy | Asia PacificA-Share Sentiment Fell as Trading Volume Dropped amid Soft Macro Data Morgan Stanley Asia Limited+Laura WangEquity Strategist Laura.Wang@morganstanley.com +852 2848-6853 Chloe LiuEquity Strategist Chloe.Liu1@morganstanley.com +852 2848-5497 Catherine ChenEquity Strategist Catherine.Chen@morganstanley.com +852 3963-4186 Exhibit 1 : MS A-share Sentiment Indicator (MSASI): 31% (weighted), down 5ppt vs. September 415002000250030003500400045005000550060000%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-24Nov-24MSASI (Simple)MSASI (Weighted)MSASI (Simple) CurrentMSASI (Weighted) CurrentCSI300 (RHS)75%20%=31%23% Source: CEIC, Bloomberg, Wind, RIMES, Morgan Stanley Research. Data as of September 11, 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-24Apr-24Jun-24Aug-24Oct-24MSASI (Simple)MSASI (Weighted)MSASI (Simple) CurrentMSASI (Weighted) CurrentCSI 300 (RHS)23%31%MSASI was launched on 11 March, 2019 Source: CEIC, Bloomberg, Wind, RIMES, Morgan Stanley Research. Data as of September 11, 2024.Market sentiment dropped with reduced trading volume amid softening macro condition and lackluster 2Q earnings. Sentiment may stay bumpy as consensus earnings downward revisions reaccelerate. Expectation for policy pivot may rise again, but clearer signs are needed before getting overly optimistic. A-share investor sentiment dropped vs. prior week: Weighted and simple MSASIs dropped by 5ppt and 7ppt to 31% and 23%, respectively, vs. prior cut-off date (September 4). Average daily turnover (ADT) for ChiNext, A-shares, Equity Futures and Northbound (September 5- 11) decreased by 22%, 21%, 8% and 24%, respectively, vs. the prior cycle (August 29- September 4). RSI-30D dropped by 10ppt vs. the prior cut-off date (September 4). Meanwhile, consensus earnings estimates' downward revisions have reaccelerated as we expected. Southbound net inflows continued for the 29th consecutive week (early Feb-24): Southbound saw net inflows of US$ 978mn during September 5-11, with YTD and MTD net inflows hitting US$61.3bn and US$2.4bn, respectively. Note: As announced on July 26, 2024, by HKEX, Shanghai Stock Exchange and Shenzhen Stock Exchange, publishing of Northbound daily purchase and sale data was effectively terminated as of August 19, 2024. The last day for Northbound daily buy and sell data to be available is August 16, 2024. The market may stay range-bound after the disappointing 2Q results season, amid persistent deflationary risks posted by the weakening macro: 2Q24 earnings wrapped up as the 12th cons