<div id="readability-page-1"><div><p><span>Chinese companies could be moving into a stronger second-quarter profit setup after a better first-quarter earnings picture, with Morgan Stanley pointing to rising exports and early signs of reflation as potential revenue support. Strategists led by Laura Wang said companies in the MSCI China A Onshore Index that missed consensus estimates outnumbered those beating them by 12.5% in the first quarter, improving from the 23.2% gap seen in the prior quarter. That shift follows a long period of earnings disappointments that has kept many investors cautious about putting money to work beyond sentiment-driven technology names.</span></p><p><span>Morgan Stanley said the earnings setup should turn more favorable after summer, as a supportive capex cycle continues to drive demand across capital goods sub-sectors. The firm highlighted artificial intelligence data centers, battery equipment, and robotics as areas benefiting from this trend. Recent e-commerce regulatory changes could also help create a more rational competitive landscape, while foreign-exchange losses from yuan conversions are still likely to persist but may weigh less heavily going forward.</span></p><p><span>The improved earnings backdrop also prompted Morgan Stanley to lift its China index targets, citing stronger profit momentum and Chinese companies' dominance in global supply chains. The firm raised its CSI 300 Index target to 5,400 points for the second quarter of 2027, up from its prior 4,840 target for December 2026, implying 9% upside from Tuesday's close. Investor attention now shifts to Alibaba Group Holding </span><span>, which is set to report before the US market open Wednesday with cloud revenue growth expected to accelerate, and Tencent Holdings (TCEHY), which is expected to deliver a sixth consecutive quarter of double-digit gains as gaming and advertising resilience help offset heavier AI spending.</span></p></div></div>

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<p>Morgan Stanley projects a 9% upside for China's CSI 300 Index, raising its target to 5,400 points for Q2 2027, up from 4,840 for December 2026. The firm cites improved earnings momentum, driven by rising exports and a supportive capex cycle, particularly in AI data centers and robotics. The earnings outlook is more favorable following a better first quarter, with fewer companies missing consensus estimates. Investor focus is on Alibaba and Tencent, with expectations of strong revenue growth in cloud and gaming sectors.</p>

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Morgan Stanley Sees 9% Upside For China's CSI 300