June 18, 2015

"In June, sentiment shifted sharply lower, with the majority now expecting returns of 10 percent or less for all indexes."

Bloomberg Morgan Stanley just did an in-depth survey to see how major investors currently feel about Chinese equities. They were not optimistic. by Julie Verhage

'Brian Kelleher, Morgan Stanley China analyst, and his team find that, on average, respondents expect the MSCI China Index to rise a mere 1.4 percent over the next 12 months on a weighted average basis. That's the smallest gain since Morgan Stanley began conducting its survey in March 2013. Meanwhile, more than half of investors think China's A-share market, the Chinese stocks reserved largely for local investors, is already in a bubble.

'The survey was done between June 8 and 15 and included responses from 39 of Morgan Stanley's clients who were classified as Chinese equity investors. The change in sentiment among these investors becomes more apparent when looking at the expected returns over the next 12 months. Back in May, the majority expected a rise of 10-20 percent for the Hang Sang Index and the MSCI China Index, and a 0-10 percent return for Shanghai's A-shares.

'Meanwhile, the respondents' opinions about what's driving Chinese stocks are as illuminating as ever. On the left side, we have all the things that could give Chinese stocks a boost. Almost all have to do with further stimulus measures by China's central bank and reform initiatives. To the right are the things that could cause stocks to retreat. They include such fundamentals as a slowdown in the economy and increasing loan losses at banks.'

charts here

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