Decline in Investor Sentiment in China’s A-Share Market
Investing.com — Investor sentiment in China’s A-share market has declined over the past week due to slower trading volume amid macroeconomic uncertainties, as noted by Morgan Stanley on Friday.
The investment bank reported a drop in its Market Sentiment and Activity Score Index (MSASI) by 6 and 8 percentage points, respectively, reaching 67% and 56% as of December 25. This indicates weaker enthusiasm compared to the previous week.
Morgan Stanley highlighted that the average daily turnover for ChiNext, A-shares, equity futures, and Northbound trading decreased by 16%, 17%, 12%, and 27%, respectively, indicating a significant pullback in trading activity.
The bank noted, “Equity market could be bumpier with a deflationary environment, downward earnings risks, more hawkish Fed tone and CNY depreciation pressure.”
Moreover, Morgan Stanley emphasized the impact of China’s subdued macroeconomic backdrop, indicating that policymakers plan to issue RMB 3 trillion ($411 billion) in special treasury bonds in 2025 to bolster the economy. This marks a significant increase from RMB 1 trillion issued in 2024. The increase aims to support consumption, investments, and recapitalize large state banks.
In contrast, Southbound trading has shown positive trends, with net inflows of $3.1 billion during the week, indicating 42 consecutive weeks of positive inflows. Year-to-date net inflows now stand at $100.5 billion.
Amid these economic dynamics, Morgan Stanley advises investors to focus on "dividend yield plays and earnings certainty" to navigate the volatile environment, maintaining a cautious outlook as China faces an economic slowdown and evolving global monetary policy.
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