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During the May Day holiday, Hong Kong stocks continued to rise sharply for two days, with the Hang Seng Index and the Hang Seng Technology Index rising 4% respectively.Populargameshows.01% and 7.31%, which makes A-share investors look forward to tomorrow's market.

In the process of a significant rise in the Hong Kong stock and A-share markets, there have been bullish voices and positions of foreign investors such as Morgan Stanley, Goldman Sachs, UBS and so on.

Various data show that hedge funds and mutual funds around the world are accelerating their purchases of Chinese stocks, and foreign sentiment is being repaired. How will A-shares go after the festival? Can the return of foreign capital continue? A few days ago, a macro meeting minutes of Morgan Stanley showed that the recovery in Hong Kong stocks and An and significance may be the result of stronger fundamentals and a reversal in capital.

Morgan Stanley analysts believe that China's economy stabilized and rebounded in the first quarter of 2024, and economic indicators showed signs of stabilizing and rebounding, but the continued contraction of the real estate market put pressure on the economy. The government's trade-in policy is slightly stronger than expected, helping to stimulate domestic demand and solve the problem of overcapacity. In addition, the capital market policy turns to provide returns for investors, strictly control increments, and improve the quality of listed companies, which is conducive to the development of the secondary market.

The rebound of China's stock market is driven by both macro and capital.

Morgan Stanley analysts pointed out that the recent rebound in China's stock market is mainly affected by macroeconomic factors, especially the logic behind the capital chain.

From the quantitative model analysis, in February this year, there are already signs that the Chinese stock market or the entire Asia-Pacific region may usher in a reversal. In terms of capital flows, it can be observed that hedge funds dominated the purchase, rather than retail investors, the analysts said.

Despite outflows from the European market from February to April, overall outflows from the European market have reached $2 billion a month since April, according to MSCI and ETF market data. At the same time, the stronger dollar and the rise in US stocks have also led to a wave of risk release in the global market, which has affected the performance of the A-share market, but in the Asia-Pacific region, especially in the Chinese market, there is more money to re-position.

In April, the flow of money changed, and investors began to redeploy money, adding positions in different sectors and choosing based on fundamentals rather than extensive short-term coverage, and quantitative models showed a significant increase in activity of CTA strategic products in the Chinese stock market in the past week or two. Data show that CTA has been increasing its positions in China's stock market for about a year and a half, and since March last year, this strategy has reached a very significant level in the Hang Seng Index or other Chinese stock markets.

To sum up, the rebound in China's stock market is mainly driven by macroeconomic factors and capital flows, especially the buying behavior led by hedge funds and the active participation of CTA.

Reasons for upgrading the ratingPopulargameshowsPolicy support and valuation attraction

Morgan Stanley analysts also responded to the previous reasons for upgrading Chinese stocks, pointing out that there are two reasons:

First of all, there is policy support. In particular, the new "National Nine articles" and other national policy measures are expected to significantly improve shareholder returns and stock dividend yield (ROE). By comparing this with similar policies in Japan, it is widely believed that this will lead to a long-term bull market for the Chinese stock market.

The second is the attractiveness based on valuation. Although the economic situation in the first quarter is not optimistic, from the comparison between corporate earnings and market expectations, the market believes that the valuation of the Chinese stock market has become relatively cheap and increasingly attractive.

For the changes in these factors, Morgan Stanley analysts believe that policy support may indeed have a positive impact on the stock market, and the market's concerns about the real estate market may be exaggerated.

"in fact, the proportion of real estate in the Chinese stock market is not high, and the proportion of the real estate sector in the Minsheng China index is less than 5%, and it has declined in recent years." Analysts at Morgan Stanley pointed out that the real estate industry plays an important role in pulling the upstream and downstream industrial chains of China's economy, including consumer goods industries and job markets such as raw materials, construction, energy, machinery and equipment, as well as household appliances. Therefore, to observe the real estate market, we should consider the impact of industry on the economy as a whole.

How strong is the rebound? Need to pay attention to the changes in the global economic environment

Whether this rebound is sustainable, Morgan Stanley analysts believe that it is necessary to pay attention to the future macroeconomic development and changes in capital flows.

Morgan Stanley analysts pointed out that the current market uncertainty about the Chinese stock market mainly comes from the changes in the global macroeconomic environment and the process of domestic economic restructuring. Despite policy support and valuation attractiveness, there are still factors such as slowing global economic growth and trade frictions that may affect market sentiment and investor confidence.

In addition, Morgan Stanley analysts are also concerned about the reform of state-owned enterprises. Morgan Stanley believes that the reform of state-owned enterprises is of great significance in improving the efficiency of resource allocation, stimulating market vitality and enhancing the competitiveness of state-owned enterprises. If state-owned enterprises can achieve more efficient allocation of resources and more reasonable dividend policy, it will help to enhance investors' confidence in China's stock market, which will have a positive impact on strategic investment.

(article source: financial Union)