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In a note to clients Tuesday, Morgan Stanley analysts said the firm is “even more bullish” on China.
They explained that they see an “earlier and stronger growth recovery from 1Q23” with a faster reopening, stronger housing support, and tech regulatory easing, “lifting 2023 GDP to 5.7%Y and 12m USDCNY to 6.65.”
“We further raise China’s 2023 GDP growth by 0.3ppt to 5.7% (vs. consensus of 4.8%), as the near-term pain of a fast reopening will likely be compensated by an earlier and stronger recovery. Mobility indicators have rebounded one month after full reopening, while more incremental easing has come through in property and big tech regulation,” the analysts said.
Morgan Stanley also believes the market is “under-appreciating the far-reaching ramifications of reopening” and the possibility that a robust cyclical recovery could occur “despite lingering structural headwinds.” They added that, in their view, China is set to top global equity market performance in 2023.
“China equities are poised to lead global equity markets with further notable outperformance of regional (EM overall & Japan) and global (S&P) peers. The current situation is on par with that in late 2008/early 2009, in our view, with many investors insufficiently exposed to what is likely a key cross-asset portfolio alpha driver for 2023,” wrote the analysts.
