The Hong Kong stock market plunge on Monday is an undeniable opportunity for Morgan Stanley. It suggests that investors purchase a dip. Relations between Beijing and Washington improve as China’s economy recovers. The Chinese market continues to have a low correlation with the US.
The chief China equity strategist for the Wall Street bank is Laura Wang. Morgan Stanley continues to hold an overweight rating on Chinese equities, she said in a note dated January 30. She also recommends that investors buy the dip at this time.
Key indicators are in sync
On Monday, the Hang Seng Index fell more than 2.7%. During the two trading days last week following Hong Kong’s Lunar New Year celebrations, it erased most of its 2.9% gain. So far this year, the benchmark is up by 12%.
Mixed holiday data, regulatory uncertainty surrounding a probable US investment ban on Chinese tech sectors, and profit-taking ahead of the Fed’s rate decision due on February 1 were among the key drivers of Monday’s correction, according to Morgan Stanley.
As witnessed at State Council and provincial level meetings in Beijing, Shanghai, Zhejiang, and Guangdong, the bank continues to see encouraging signs of policymakers in China placing economic growth above other projects.
Geopolitics weighing in on predictions
Wong mentioned Secretary of State John Kerry’s visit to China and the appointment of Qin Gang as the new Foreign Minister as indicators of stability in their bilateral connections on the relationship front. She also said that Chinese President Xi Jinping’s attendance at the planned APEC Summit in San Francisco later this year is likely.
Hao Hong, a long-time market veteran, has predicted the Morgan Stanley Hong Kong equities outlook. He expected the equity index to reach its highest point in over a year as early as 2021.
Furthermore, Wang claimed that the China equity market’s connection to its US counterpart had reached near-historic lows. According to her, China’s increasingly autonomous post-COVID recovery trend, fiscal and monetary policy tools that are more autonomous, and generally improving economic and operative conditions should support this performance decoupling to continue for longer.
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