China Equity Strategy A-Share Sentiment Hit Record High Ami...-110736210

M Update China Equity Strategy | Asia PacificA-Share Sentiment Hit Record High Amid Policy Expectation Swings 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): 150% (weighted), up 92ppt vs. September 2515002000250030003500400045005000550060000%20%40%60%80%100%120%140%160%180%200%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%=150%145% Source: CEIC, Bloomberg, Wind, RIMES, Morgan Stanley Research. Data as of October 9, 2024.Exhibit 2 : MSASI trajectory since January 1, 20192,8003,2003,6004,0004,4004,8005,2005,6006,0000%20%40%60%80%100%120%140%160%180%200%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)145%150%MSASI was launched on 11 March, 2019 Source: CEIC, Bloomberg, Wind, RIMES, Morgan Stanley Research. Data as of October 9, 2024.Record-high trading volume and MS A-share sentiment reading reflected exuberant expectations for policy stimulus. However, near-term uncertainty remains; we focus on earnings visibility and dividend plays as we await further policy comments. A-share investor sentiment off the chart: Weighted and simple MSASIs both surpassed the 100% level for the first time in our index publishing history, increasing by 92ppt and 93ppt to 150% and 145%, respectively, vs. the prior cut-off date (September 25). Average daily turnover (ADT) for ChiNext, A-shares, Equity Futures and Northbound (September 26-October 9) increased by 311%, 253%, 220% and 190%, respectively, vs. the prior cycle (September 12-25). RSI-30D increased by 11ppt vs. the prior cut-off date (September 25). Together, these more than offset the accelerating downward momentum of consensus earnings estimate revision breadth.Southbound net inflows continued for the 31th consecutive week (early Feb-24): Southbound saw net inflows of US$2.2bn during September 26-October 9, with YTD and MTD net inflows hitting US$64.6bn and US$184mn, 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 Northbound daily buy and sell data was made available was August 16, 2024. Market sentiment could experience wide volatilities in the near term: A-share market sentiment swings have risen to