Morgan Stanley: Hong Kong and A-share markets expected to receive significant liquidity support within the year, maintaining a cautious optimistic view.

Morgan Stanley released a research report stating that the Hong Kong and A-share markets started strong in 2026. As of this Tuesday (13th), the Hang Seng Index and MSCI China Index rose by 5.6% and 5.5% respectively, outperforming the S&P 500 index and other major market indices. The Shanghai Composite Index also recorded a gain of about 5.5% during the same period. The bank believes that the Hong Kong and A-share markets are supported by substantial liquidity rather than speculative momentum. The recent strong activity of new listings in the Hong Kong market, along with the appreciation of the RMB, has attracted interest from global investors. On the other hand, the A-share market has seen an increase in fund allocation due to rising bond yields, reduced attractiveness of term deposit terms, and continuous buying by insurance funds, providing stable liquidity support. Morgan Stanley believes that these trends will continue in the medium to short term, maintaining a cautiously optimistic view on Chinese stocks over the next 6 to 12 months. However, they also remind investors to monitor potential effects of the upcoming Lunar New Year holiday, the possibility of further tightening of supervision in the A-share market, global geopolitical instability, oversupply of new listings leading to dilution effects, as well as risks such as worsening macroeconomic conditions or deflation eroding corporate profits and investor sentiment.