Morgan Stanley: Global funds are returning to A-shares, some funds are starting to increase holdings of growth stocks.

Morgan Stanley stated that the global long-term investors have paused their withdrawal from the Chinese stock market, and the bearish sentiment of some funds has eased. Strategy analysts Gilbert Wong and Laura Wang wrote in a report on only long positions on March 4 that the capital outflow from the Chinese stock market slowed down at the end of February, and regional active funds began to increase their holdings in growth and technology stocks. The report was released as mainland Chinese stock market reversed the trend of continuous outflow of foreign funds for the past 6 months. Analysis shows that the change in fund flow may not solely be driven by the "national team", which could help alleviate some concerns about the sustainability of the rebound from the low point in January. The strategists stated that the actual volatility rate of the MSCI China Index soared from 20% at the end of December last year to over 30% in mid-February this year on an annualized basis, making deep selling of Chinese stocks a high-risk position for most Asia funds. Citing data from EPFR, the strategists indicated that the net outflow of funds from mainland China and Hong Kong stock markets last month was $2.2 billion, with 95% attributable to investor redemptions, compared to $2.6 billion in January. The slowing outflow of funds may be an early sign that asset management companies are reconsidering their asset allocations in the entire Asia region. Some funds have started to reduce their holdings in assets in India citing overvaluation and better risk-return ratios elsewhere, signaling a shift that could indicate that the Chinese stock market will regain its lost share in global portfolios.