China Equity Strategy A-Share Sentiment Falls Sharply as Ma...-110898144

M Update China Equity Strategy | Asia PacificA-Share Sentiment Falls Sharply as Market Volume Recedes Morgan Stanley Asia Limited+Laura WangEquity Strategist Laura.Wang@morganstanley.com +852 2848-6853 Chloe LiuEquity Strategist Chloe.Liu1@morganstanley.com +852 2848-5497 Catherine ChenEquity Strategist Catherine.Chen@morganstanley.com +852 3963-4186 Exhibit 1 : MS A-share Sentiment Indicator (MSASI): 82% (weighted), down 68ppt vs. October 915002000250030003500400045005000550060000%20%40%60%80%100%120%140%160%180%200%Jan-14Jun-14Nov-14Apr-15Sep-15Feb-16Jul-16Dec-16May-17Oct-17Mar-18Aug-18Jan-19Jun-19Nov-19Apr-20Sep-20Feb-21Jul-21Dec-21May-22Oct-22Mar-23Aug-23Jan-24Jun-24Nov-24MSASI (Simple)MSASI (Weighted)MSASI (Simple) CurrentMSASI (Weighted) CurrentCSI300 (RHS)75%20%=82%75% Source: CEIC, Bloomberg, Wind, RIMES, Morgan Stanley Research. Data as of October 16, 2024.Exhibit 2 : MSASI trajectory since January 1, 201975%82%2,8003,2003,6004,0004,4004,8005,2005,6006,0000%20%40%60%80%100%120%140%160%180%200%Dec-18Feb-19Apr-19Jun-19Aug-19Oct-19Dec-19Feb-20Apr-20Jun-20Aug-20Oct-20Dec-20Feb-21Apr-21Jun-21Aug-21Oct-21Dec-21Feb-22Apr-22Jun-22Aug-22Oct-22Dec-22Feb-23Apr-23Jun-23Aug-23Oct-23Dec-23Feb-24Apr-24Jun-24Aug-24Oct-24MSASI (Simple)MSASI (Weighted)MSASI (Simple) CurrentMSASI (Weighted) CurrentCSI 300 (RHS)MSASI was launched on 11 March, 2019 Source: CEIC, Bloomberg, Wind, RIMES, Morgan Stanley Research. Data as of October 16, 2024.Sentiment dropped as trading volume declined amid weaker macro data and underwhelming policy follow-through. We expect market volatility to remain relatively high, and advise focusing on dividend yield plays and earnings certainty. A-share investor sentiment fell significantly vs. prior week, though still high relative to historical range: Weighted and simple MSASI decreased by 68ppt and 69ppt to 82% and 75%, respectively, vs. the prior cut-off date (Oct 9). All underlying data series have declined sharply vs. the prior week - Average daily turnover (ADT) for ChiNext, A-shares, Equity Futures and Northbound (Oct 10-16) decreased by 19%, 28%, 35% and 23%, respectively, vs. the prior cycle (Sep 26-Oct 9). RSI-30D decreased by 9ppt vs. the prior cut-off date (Oct 9). Consensus earnings estimate revision breadth remained in negative territory and stayed largely flat.Southbound net inflows continued for the 32th consecutive week (early Feb-24): Southbound saw net inflows of US$3.8bn during October 10-16, with YTD and MTD net inflows hitting US$68.4bn and US$4.2bn, respectively. Note: As announced on July 26, 2024, by HKEX, Shanghai Stock Exchange and Shenzhen Stock Exchange, publishing of Northbound daily purchase and sale data was effectively terminated as of August 19, 2024. Northbound daily buy and sell data were last made available on August 16, 2024. Broad-based slippage on macro front; however, recent policy follow-through has fallen short of market expectations and has reduced conviction in China's ref