Investor Sentiment in China’s A-Share Market Slumps Amid Macroeconomic Uncertainties
Investor sentiment in China’s A-share market has weakened over the past week, according to a note from Morgan Stanley. The bank’s weighted and simple Market Sentiment and Activity Score Index (MSASI) dropped by 6 and 8 percentage points, respectively, to 67% and 56% as of December 25.
The decline in investor sentiment is reflected in a significant pullback in trading activity, with average daily turnover for ChiNext, A-shares, equity futures, and Northbound trading falling by 16%, 17%, 12%, and 27%, respectively. The bank attributes the slowdown to a deflationary environment, downward earnings risks, a more hawkish Federal Reserve tone, and pressure on the Chinese yuan.
However, Southbound trading provided a bright spot, with net inflows of $3.1 billion during the week, marking 42 consecutive weeks of positive inflows. Year-to-date net inflows now stand at $100.5 billion.
In light of these dynamics, Morgan Stanley advises investors to focus on “dividend yield plays and earnings certainty” to navigate the volatile environment. The bank’s analysts believe the broader outlook remains cautious, as China grapples with an economic slowdown and evolving global monetary policy.
