Morgan Stanley: Hong Kong stocks and A-shares are expected to receive substantial liquidity support this year, maintaining a cautiously optimistic outlook

Morgan Stanley published a research report indicating that the Hong Kong stock market and A-shares started strongly in 2026. As of this Tuesday (13th), the Hang Seng Index and MSCI China Index rose by 5.6% and 5.5% respectively, outperforming the S&P 500 Index and other major market indices during the same period, while the Shanghai Composite Index also recorded an increase of about 5.5%.

The bank believes that the Hong Kong and A-share markets are supported by substantial liquidity rather than speculative momentum. Recent IPO activities in the Hong Kong market have remained strong, coupled with the appreciation of the Renminbi, attracting global investor interest. Meanwhile, the A-share market has seen increased capital allocation due to rising bond yields and decreased attractiveness of time deposit terms, along with continuous buying from insurance funds, providing stable liquidity support.

Morgan Stanley believes that this trend will continue at least in the short to medium term, maintaining a cautiously optimistic outlook on Chinese stocks for the next 6 to 12 months. However, it also reminds investors to monitor potential risks such as the Lunar New Year holiday effect, possible tightening of regulations in the A-share market, global geopolitical turmoil, dilution effects from excess new stock supply, and risks from a deteriorating macro environment or deflation eroding corporate profits and investor appetite