Morgan Stanley expects that A-shares and Hong Kong stocks will continue to receive liquidity support, and will prefer Hong Kong stocks if global volatility eases

Morgan Stanley published a research report stating that although global markets have been volatile recently, and the Hong Kong and China A-share markets significantly corrected last Friday (30th), they still believe that effective cooling measures for the A-share market, the strengthening of the US dollar against the Chinese yuan, and the initial effectiveness of long-term regulatory support for Hong Kong can sustainably provide positive liquidity support for the A-share and Hong Kong markets.

Morgan Stanley also noted that investors have experienced a relatively long bull market since the beginning of the year, and with the Lunar New Year approaching, there will be some profit-taking. Currently, there is a preference for large-cap stocks over small-cap stocks in the A-share market; if global volatility tends to ease, there will be a greater preference for Hong Kong stocks.

The firm believes that the rising geopolitical uncertainties in other parts of the world will enhance the attractiveness of Chinese assets. The Hong Kong market will become the preferred market for investors due to its reasonable valuations, low positions among global investors, numerous stock investment opportunities, and a very active IPO market. They believe that in the short term, Hong Kong stocks may outperform the A-share market, but this will ultimately depend on whether global volatility can dissipate quickly