Relay Goldman Sachs! Morgan Stanley is optimistic about the Chinese stock market: The Shanghai Shenzhen 300 Index is expected to rise by another 9%.

After Goldman Sachs, another major Wall Street bank is optimistic about the Chinese stock market. Morgan Stanley released a report on Tuesday stating that following the encouraging performance in the first quarter, Chinese companies' profit prospects in the second quarter are expected to improve. Export growth coupled with industry recovery will drive up corporate revenue. Morgan Stanley has set a target of 5400 points for the Shanghai and Shenzhen 300 Index in the second quarter of 2027, which is 9% higher than the closing price on Tuesday. Previously, Goldman Sachs recommended "overweighting China" and raised the target for the Shanghai and Shenzhen 300 Index to 5300 points over the next 12 months. The team of strategists led by Laura Wang at Morgan Stanley wrote in the report on Tuesday that among the stocks included in the MSCI China A shares onshore index, there were 12.5% more companies with performance below expectations in the first quarter than those with better-than-expected performance, an improvement from a gap of 23.2% in the previous quarter. The profit trend in the MSCI China onshore index is on the rise. Previously, due to continuously lower-than-expected earnings, investors were only willing to allocate to emotion-driven tech stocks, while being cautious towards other sectors. If corporate profits can continue to recover, along with overall economic growth, there is a possibility of other sectors besides tech stocks experiencing an upward trend. The strategists stated, "After the summer, the profit environment will become more favorable. Strong capital expenditure cycles are driving steady growth in demand for various capital goods sectors." Morgan Stanley's strategists emphasized that industries benefiting from this trend include artificial intelligence data centers, battery equipment, and Siasun Robot & Automation. In addition, recent regulatory adjustments in the e-commerce sector are helping to create a more rational competitive landscape and are another supporting factor for the second quarter outlook. For overseas investors, Morgan Stanley's strategists believe that the impact of exchange rates will gradually diminish. Based on the improvement in profits and the dominant position of Chinese companies in the global supply chain, Morgan Stanley has raised its target for the Chinese stock market index: setting the target for the Shanghai and Shenzhen 300 Index in the second quarter of 2027 at 5400 points, compared to the previous target of 4840 points in December 2026. The new target is 9% higher than the closing price on Tuesday. It is worth noting that Goldman Sachs recently maintained an "overweight" rating on the Chinese stock market and raised its target for the Shanghai and Shenzhen 300 Index to 5300 points for the next 12 months. Goldman Sachs pointed out that the PPI index turning upwards signifies that the Chinese industrial sector is entering a new phase of profit expansion. Goldman Sachs clearly defines three major allocation directions: AI hardware and computing power infrastructure; targets benefiting from the fifteenth five-year plan, focusing on strategic emerging industries such as advanced manufacturing, new energy, and biotechnology; HALO assets and energy security, including power, petroleum and petrochemicals, and grid upgrades. The current market focus is shifting to leading Chinese tech companies. Alibaba (09988) is expected to release its earnings before the US market opens on Wednesday, with market expectations that its cloud business revenue growth will accelerate; Tencent (00700) is expected to achieve double-digit growth for the sixth consecutive quarter, with the resilience of its gaming and advertising businesses offsetting the increasing pressure from investments in the field of artificial intelligence.