Following Goldman Sachs, Morgan Stanley also clearly takes a bullish stance on the Chinese stock market and believes that "A-shares are superior to H-shares".

Following Goldman Sachs, Morgan Stanley has also sent out a clear bullish signal on the Chinese stock market and given the same allocation advice of "A-shares are superior to H-shares". The judgments of the two Wall Street giants are highly consistent.

Morgan Stanley analysts Laura Wang and others released the latest research report, raising the target levels of several Chinese stock indices on the grounds of early signs of improved earnings of Chinese enterprises and the dominant position of domestic enterprises in the global supply chain. Among them, the target level of the CSI 300 Index was raised to 5,400 points, implying an upside potential of about 9% compared with Tuesday's closing price.

In terms of configuration direction, Morgan Stanley clearly stated that it prefers A-shares over H-shares. The reasons include the higher concentration of high-end upstream manufacturing and hard-core technology enterprises in A-shares, the attention paid to the IPO market, and the readiness of the national team at any time. With the disclosure of second-quarter results, factors such as strong exports, early signs of re-inflation, and a more rational competition pattern in e-commerce are expected to further improve the profit outlook for enterprises.

Morgan Stanley's above stance highly echoes the previous judgment of Goldman Sachs. In its Asian equity strategy report, Goldman Sachs also gave the advice of "strongly overweight China, A-shares outperform H-shares", and raised the 12-month target of the CSI 300 Index to 5,300 points, implying a price increase of about 9% and a total return of 13% in US dollars.

Profit improvement is beginning to show signs of hope, and multiple index target levels are being raised simultaneously.

Morgan Stanley pointed out that early signs of improvement in the earnings of Chinese enterprises have emerged. The overall earnings of MSCI China A-shares in the first quarter of 2026 were still below the market consensus, but the extent to which they fell short of expectations was significantly reduced compared to the fourth quarter of 2025 - the number of companies that failed to meet expectations decreased significantly from the previous quarter.

From a structural perspective, the improvement in profits has mainly been concentrated in the industrial and financial sectors. As the second-quarter earnings reports start to come out from July, the outlook for corporate profits may look more favorable, supported by strong export growth, early signs of reflation, and a more rational competitive environment in the e-commerce sector.

Driven by the logic of improved profitability, Morgan Stanley has raised the target levels for several Chinese stock indices. The target time point for the CSI 300 Index has been extended to the second quarter of 2027, with the target level raised from the previously set 4,840 points (corresponding to December 2026) to 5,400 points, which is approximately 9% higher than Tuesday's closing level.

The target level for the Hang Seng China Enterprises Index has been raised from 9,700 points to 9,900 points, while the target for the MSCI China Index has been slightly increased from 90 points to 91 points.

A-shares outperform H-shares: Structural concentration is the key.

Morgan Stanley has a clear stance on the allocation choice between A-shares and H-shares. Given that A-shares have a higher concentration in high-end upstream manufacturing and hard-core technology enterprises, coupled with the sustained heat of the A-share IPO market, Morgan Stanley prefers A-shares over H-shares.

In terms of specific directions, the research report is optimistic about upstream industries with heavy assets, believing that these industries are relatively less affected by the super cycle of artificial intelligence. Some materials, industrial and energy sectors have been explicitly listed as key areas of focus.

Goldman Sachs also pointed out the structural headwinds facing H shares - about 37% of the weight of the MSCI China Index is concentrated in software technology stocks. Against the backdrop of a global market that is extremely favorable to hardware and selling off software, H shares are under short-term pressure. In contrast, A shares benefit from multiple favorable factors such as the end of 41 months of PPI deflation and its transition to positive growth, a significant upward revision of the 2026 earnings forecast, and a 4% total shareholder return rate that attracts household savings to enter the market. The consistency in the core logic of the two institutions provides a clearer reference coordinate for the current allocation direction of China's stock market.

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