How are energy investors positioned?
Investing.com -- Morgan Stanley (NYSE:MS) took note of a further decline in investor sentiment for China’s A-share market, noting a decrease in turnover and lukewarm macroeconomic indicators. The firm highlighted a lack of near-term stimulus measures despite an ongoing interim tariff truce.
While structural improvements in the equity market remain intact, Morgan Stanley advises investors to be selective, favoring technology and innovation sectors as well as yield plays, and to prefer offshore investments over A-shares.
According to the firm, the weighted Morgan Stanley A-Share Sentiment Index (MSASI) and simple MSASI fell 8 and 7 percentage points to 41% and 54%, respectively, compared to the previous cycle ending May 21.
Average daily turnover for ChiNext, A-shares, and Northbound trading declined by 9%, 7%, and 9%, respectively, while equity futures turnover saw a slight increase of 1% versus the prior cycle from May 15-21. The RSI-30D, a technical indicator, also dropped marginally by 3 basis points since May 21.
In contrast to the downward trend in sentiment and turnover, Southbound trading experienced net inflows of $2.1 billion over the week of May 22-28. Year-to-date, net inflows have reached a substantial $81.2 billion, with $4.0 billion occurring in the month to date.
It is important to note that as of August 19, following an announcement by HKEX, the Shanghai Stock Exchange, and the Shenzhen Stock Exchange on July 26, 2024, the publication of Northbound daily purchase and sales data has been discontinued, with the last data available on August 16.
The macroeconomic outlook remains muted, with Morgan Stanley’s economics team for China indicating that macro policy and growth model rebalancing seem elusive. A recent example cited is the ongoing car price competition, which is contributing to deflation due to supply-demand imbalances.
Although there is increasing discussion about the need for economic rebalancing, the prevailing supply-driven model persists, suggesting that reflation is unlikely in the near term and will remain uncertain in the longer term.
In addition, retail sales growth in China also decelerated in April amid tariff disruptions, with a year-over-year increase of 5.1%, down from 5.9% in March and below the consensus forecast of 5.5%.
The compound annual growth rate compared to 2019 also fell to 3.3% from 4.3% in March. Morgan Stanley’s consumer team interprets the softer consumer sentiment as reflecting the impact of tariff disruptions.
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