Morgan Stanley raises China stock targets over 7%

Morgan Stanley has increased its targets for two major Chinese stock indices, the MSCI China and the Hang Seng, by over 7 percent. This change follows a positive outlook for earnings and valuations in the Chinese market. Investment banks on Wall Street are growing more optimistic about Chinese equities. Morgan Stanley's upgrade is its second in two months. Goldman Sachs also noted that client interest in Chinese stocks is at its highest level since early 2021, when the market peaked. According to a report by Goldman strategists, China is seen as an attractive option for investors looking for liquidity and diversification. The MSCI China Index and the Hang Seng Index have both increased by about 16 percent and 17 percent this year, respectively. Morgan Stanley now predicts the MSCI China Index will reach 86 by the end of the year, instead of its previous target of 77. The Hang Seng Index is expected to hit 25,800, up from 24,000. These targets suggest there is a potential 9 percent increase from current levels. The report from Morgan Stanley also highlights a slightly improved outlook for earnings and valuations. It suggests that the MSCI China Index should be valued similarly to the MSCI Emerging Markets Index, which currently stands at 12.5 times forward earnings.