Morgan Asset Management: A-share valuation remains attractive, with the full-year earnings growth of A-shares expected to remain positive

Recently, there has been turbulence in the global financial markets. Will this bring opportunities for the domestic market? How should investments respond in the second half of 2024? This has become a topic of concern for onshore investors. Recently, at the Morgan Stanley Investment Management Global Market Overview Third Quarter Strategy Meeting, analysts shared their latest views on global macroeconomics, opportunities in the Chinese market, and trends in global asset allocation.

Zhu Chaoping, Senior Global Market Strategist at Morgan Stanley Asset Management China, stated at the meeting that the current global stock market turbulence is due to the high valuation of US stocks, combined with the reversal of yen carry trades and rising expectations of an economic recession.

During the same period, European stock markets and the domestic A-share market experienced smaller fluctuations, while the volatility of Japanese, South Korean, American, and other Asian stock markets was more pronounced. This indicates that in the past arbitrage trading asset portfolios, the proportion of Japanese, South Korean, and American stock markets may be significant, hence they are more affected by the reversal of carry trades.

Given that the impact of carry trades on the domestic A-share market may be relatively small, along with the gradual accumulation of positive factors in the domestic market, after the global market experiences adjustments, A-share valuations still maintain a certain level of attractiveness in global horizontal comparisons.

Looking ahead to the second half of the year, Jiang Xianwei, Senior Global Market Strategist at Morgan Stanley Asset Management China, believes that the full-year earnings growth of A-shares is still expected to remain positive this year. Key industry sectors worth paying attention to include: domestic industries with shortcomings in the supply chain, such as chips and computer operating systems; continuing advantageous industries domestically, especially the "new three major components" with impressive export performance, including new energy vehicles, photovoltaics, and lithium batteries; industries undergoing the transition from old to new growth drivers; and opportunities to create emerging industries under the guidance of new production forces, including the artificial intelligence industry chain and the low-altitude economy industry chain.

Furthermore, the high dividend strategy that has been gaining attention domestically since last year remains worth watching in the second half of the year, especially in the context of the continuous economic recovery domestically and potential unknown risks.

Regarding the domestic bond market, Morgan Stanley Asset Management points out that foreign holdings of domestic bonds have not ceased. This is mainly based on China's position as the world's second-largest bond market, as well as the need for overseas asset diversification and hedging based on exchange rate risks. Overseas allocation to the Chinese bond market is expected to continue growing