Morgan Stanley predicts that both the A-share and Hong Kong stock markets will continue to receive liquidity support, with a stronger preference for Hong Kong stocks should global market volatility ease.

Morgan Stanley issued a research report stating that although global markets have recently experienced volatility, with significant pullbacks in Hong Kong and China’s A-share markets last Friday (the 30th), it still believes that effective cooling measures for the A-share market, the strengthening of the US dollar against the renminbi, and the initial success of long-term regulatory support for Hong Kong will continue to provide positive liquidity support for both the A-share and Hong Kong stock markets.

Morgan Stanley also noted that investors have experienced an extended bull market since the beginning of the year, combined with the approach of the Lunar New Year, resulting in some profit-taking exits. At present, large-cap stocks are preferred over small-cap ones in the A-share market; if global volatility eases, Hong Kong stocks would be more favorable.

The firm believes that rising geopolitical uncertainties in other regions globally will help enhance the attractiveness of Chinese assets. The Hong Kong market, due to its reasonable valuations, lower global investor positioning, numerous equity investment opportunities, and a very active IPO market, will become the preferred market for investors. Morgan Stanley believes that in the short term, Hong Kong stocks should outperform the A-share market, but ultimately, this will depend on whether global volatility can quickly subside.