U.S. investors are falling in love with Chinese stocks, according to a new report from banking giant Morgan Stanley (MS).
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Sentiment Shift
In a note today, Laura Wang, chief China equity strategist at the bank, said she and colleagues have been struck by the sentiment shift towards China among Stars and Stripes investors.
“There was much higher interest in Chinese equities during our latest marketing trip to the US compared to 2021 to 2024. Tech innovation in AI humanoid robotics and biotech as well as new consumption are among the focus areas,” Wang said.
Indeed, she said that over 90% of the investors she and her team had meetings with “expressed explicit willingness to increase their exposure to China, the highest level we have observed since China’s equity market peaked out in early 2021.”
Morgan Stanley said that a mix of forces has made investors more interested in China, such as its dominant global leadership in certain tech segments such as humanoids/robotics and biotech/drug development. It also highlighted moves by policymakers to stabilize the economy and nurture equities.
Indeed, President Xi has made great play this year to develop warmer relationships with the private sector, particularly tech stocks in order to compete more strongly with the U.S. in the AI race.
No China Crisis
Morgan Stanley also mentioned Chinese moves to financial liquidity, and a desire by investors to get away from a highly “US-centric” asset allocation.
Although not highlighted directly in the report U.S.-listed Chinese stocks such as EV maker Xpeng (XPEV), and tech groups Alibaba (BABA) and Tencent (TCEHY) have all performed strongly this year. See below chart:
This is despite some concerns about the health of the Chinese economy with its weaker property market, deflation and declining consumer confidence. China has also been in the sights of President Trump’s tariff strategy with punishingly high levies.
In addition, there are continued geopolitical concerns about Chinese strategy in Taiwan and its relationship with Russia.
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