Morgan Stanley believes strength of China’s Economy

Morgan Stanley believes strength of China’s Economy

By Kristina Sobol

Budrigannews.com – (NYSE:) Morgan Stanley has raised its forecasts for China’s growth, stock market, and yuan once more, becoming the latest Wall Street heavyweight to do so as the country rapidly lifts COVID-19 restrictions that have been in place for two years.

The bank’s actions included raising its forecast for Chinese economic growth by 0.3 percentage points to 5.7%, raising its target for the yuan to 6.65 to the dollar, and anticipating an additional 16% rise in the MSCI’s rapidly rising Chinese equity index.

In a note that was released late on Monday, Morgan Stanley analysts stated, “We believe the market is under-appreciating the far-reaching ramifications of reopening and the possibility that a robust cyclical recovery can occur despite lingering structural headwinds.”

They compared the current situation to that in late 2008 and early 2009 following the global financial crisis, when many international investors had sold down their positions and were left underexposed to Chinese markets. The stock market has already increased by 45 percent since the end of October.

The note added, “Don’t underestimate this rally,” pointing out that China’s real-world growth rate this year is likely to be more than six times that of the United States.

According to the bank’s analysts, “not only does that mean that MSCI China absolute earnings per share growth and return on equity is set to surge, but that an even more dramatic shift in relative terms is now in sight,”

The majority of the anticipated rise in China’s currency could occur during the first half of the year, before easing when a more significant recovery in international travel occurs.

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It has set a goal of 6.65 yuan to the dollar, which is higher than Tuesday’s rate of 6.78 and represents an 8.5% increase from just over 7.32 at the beginning of November.