2025 China Equity Mid-Year Outlook - MS report

This analysis from Morgan Stanley provides a mid-year outlook on Chinese equities, upgrading their index targets for MSCI China, Hang Seng, HSCEI, and CSI300 due to structural improvements like increased return on equity and stabilizing earnings, along with partial de-escalation of US-China tariff tensions. While they remain Equal-Weight on China within their emerging markets framework because of ongoing domestic deflationary pressures, they prefer offshore markets (Hong Kong and ADRs) over onshore A-shares. The report highlights the emergence of AI and tech leaders as a key positive development and suggests sector preferences that balance growth opportunities with defensiveness. The outlook notes that the market's earnings revision cycle is nearing its end and that while recent trade developments are positive, geopolitical uncertainty remains.