Morgan Stanley: Maintaining Confidence in Sustained Capital Inflows into the Chinese Market

On November 25, Wang Yan, Morgan Stanley's Chief China Stock Strategist, released a latest report summarizing the key issues currently of most concern to investors. She stated that since Morgan Stanley published its 2026 China Equity Strategy Outlook report, discussions regarding the medium to long-term sustainability of stocks have intensified, a conversation focusing not only on the Chinese market but also spanning globally.

"Investors appear focused on finding signals to be bullish on the Chinese market, while simultaneously expressing concern over rising market volatility. We reiterate a cautiously optimistic stance and maintain confidence in continued capital inflows into the Chinese market. Should fiscal policy be significantly strengthened and the global trade landscape improve further, we would adopt a more positive stance," Wang Yan wrote.

She indicated that Morgan Stanley's viewpoint has not turned more conservative compared to early 2025. The firm continues to emphasize to global investors that the structural improvement of the Chinese stock market will deepen persistently. This specifically includes corporations enhancing shareholder returns, improvements in corporate earnings, continuous optimization of the business environment for the private sector, proactive policy support, and a stabilizing geopolitical landscape, among others.

Morgan Stanley forecasts a target of 90 points for the MSCI China Index by December 2026, implying approximately 7% upside from its price on November 25, 2025. "Our estimate for the upside potential of the MSCI China Index has narrowed, primarily because the index's valuation has largely normalized. In fact, Morgan Stanley's global research team does not anticipate valuation expansion for any major global market: our target forward P/E ratios for December 2026 are 22x for the S&P 500, 16x for the MSCI Europe, and 13x for the MSCI Emerging Markets, compared to market consensuses of 22.8x, 15x, and 13.9x, respectively," Wang Yan stated.