Morgan Stanley Fund: High congestion in the AI field Focus on the direction of market growth under the big logic of valuation repair

Morgan Stanley Fund believes that in the medium to long term, the A-share market will still focus on the direction of Artificial Intelligence (AI). However, in the short term, its performance has been very consistent and crowded. In addition, the fund will focus on the overall growth direction under the logic of valuation repair. In specific areas, companies with the ability to go global, high-end manufacturing, as well as sectors benefiting from domestic consumption stimulus policies such as automobiles, home appliances, and consumer electronics, are all worth paying attention to. Morgan Stanley Fund stated that based on the performance of last week, the overall market further warmed up. The recent private enterprise symposium conveyed an important signal to promote the healthy and high-quality development of private economy. This further boosted market confidence, especially igniting enthusiasm for investors to continue buying technology stocks. However, the characteristics of stock market gambling with existing funds still exist, and the rise in traditional industries is not significant. Overall, several recent events have jointly driven the market's strength. The private enterprise symposium released a positive signal to support the development of private economy and encourage private enterprises to strengthen independent innovation. The concentration of technology companies in the symposium was significantly higher. AI made progress with the release of Grok3 by xAI and NSA by DeepSeek in cost reduction, which continued to stimulate the AI sector. Alibaba's capital spending guidance greatly exceeded expectations, with expected infrastructure investment in cloud and AI over the next three years surpassing the total of the past decade. The revaluation of Chinese assets is ongoing, with more obvious results in the Hong Kong stock market in the short term. Looking at the static PE, the S&P 500 is at 28.1 times, while the CSI A500 is at 14.8 times, with the valuation gap widening over the past few years; there is a high possibility of future convergence. The Hong Kong stock market has seen significant growth this year, being one of the best-performing markets globally, mainly driven by inflow of funds from the mainland and overseas. On one hand, funds from the mainland have been flowing into the Hong Kong stock market, while on the other hand, overseas funds are flowing back into the Hong Kong stock market from other emerging markets as part of global asset allocation rebalancing. Consequently, the likelihood of funds flowing out of the U.S. stock market is increasing. The recent decline in the University of Michigan's Consumer Confidence Index, along with some investment banks downgrading their economic growth forecasts for the U.S., and the relatively weak performance of the U.S. dollar index, are all favorable factors for funds flowing back into Chinese assets.