Gold Prices Steady as Markets Await Key U.S. Data and Expected Fed Rate Cut 
Asian Currencies Steady as Markets Await Fed Rate Decision; Indian Rupee Hits New Record Low 
Australia’s Economic Growth Slows in Q3 Despite Strong Investment Activity 
Germany’s Economic Recovery Slows as Trade Tensions and Rising Costs Weigh on Growth 
Oil Prices Rise as Ukraine Targets Russian Energy Infrastructure 
Asian Currencies Edge Higher as Markets Look to Fed Rate Cut; Rupee Steadies Near Record Lows 
RBI Cuts Repo Rate to 5.25% as Inflation Cools and Growth Outlook Strengthens 
BOJ Faces Pressure for Clarity, but Neutral Rate Estimates Likely to Stay Vague 
U.S. Futures Steady as Rate-Cut Bets Rise on Soft Labor Data 
Asian Markets Mixed as Fed Rate Cut Bets Grow and Japan’s Nikkei Leads Gains 
Dollar Holds Steady as Markets Shift Focus to 2026 Rate Cut Expectations 
Japan’s Service Sector Sustains Growth Momentum in November 
Trump and Lula Discuss Trade, Sanctions, and Security in “Productive” Phone Call 
Asian Markets Stabilize as Wall Street Rebounds and Rate Concerns Ease 
China’s Services Sector Posts Slowest Growth in Five Months as Demand Softens 
Dollar Slides to Five-Week Low as Asian Stocks Struggle and Markets Bet on Fed Rate Cut 
China's equity markets are bracing for a volatile 2025, cautions Morgan Stanley, highlighting downward earnings trends, potential 25% U.S. tariffs, and escalating geopolitical tensions. Analysts favor robust A-shares despite the looming headwinds.
China's Equity Markets Face Volatility in 2025
Due to concerns over geopolitical tensions, possible tariffs, and downward profit pressures, analysts at Morgan Stanley predict that China's equities markets will be quite volatile in 2025, Investing.com reports.
"We still expect a more bumpy China equity market in 2025," the bank noted in a letter shared on Friday. Deflationary trends and chronic macroeconomic headwinds are brought to light by them.
Following an 8-point decline to 77% on the Morgan Stanley A-Share Sentiment Index, the bank observed that investor mood in the A-share market has already diminished.
Morgan Stanley reported a 10%-17% decline in daily turnover across major categories from November 21-27. These segments include A-shares and ChiNext.
Earnings Revisions and Tariff Risks Dominate Concerns
Also, they point out that the market's anxiety is being reflected in the acceleration of downward earnings revisions.
Some say that the possibility of a 25% tariff on Chinese imports by the next Trump administration is a major worry for the macroeconomy.
The housing industry displayed contradictory signals, with higher sales but low developer confidence, according to Morgan Stanley. On the one hand, exports are resilient because of competitive pricing. For November, the manufacturing PMI is anticipated to remain unchanged at 50.1, indicating a moderate expansion.
Morgan Stanley's Strategy for A-Shares in 2025
According to Morgan Stanley, China's equity market is expected to face a number of challenges in the coming years. These include ongoing weak earnings until 2025, a weakening of the USDCNY to counteract tariff effects, higher equity risk premiums due to a more aggressive US policy stance, the possibility of heightened tensions between the US and China, and profit-taking after a relatively strong performance so far this year.
Morgan Stanley still favors A-shares over offshore stocks, even though they have their share of problems. In addition to the direct liquidity support from the PBOC's swap and re-lending initiatives, they point out that A-shares are less sensitive to geopolitical and currency swings.
In 2025, the company plans to avoid firms that are vulnerable to tariffs or supply chain issues and instead prioritize A-shares with excellent profitability and return on investment potential for shareholders. For this unpredictable environment, they have highlighted preferred trades on their China/Hong Kong Focus List and A-share Thematic List.
