In a note from its conversations with major investment firms on both sides of the country, the US firm reveals its thoughts on its impressions of the Chinese stock market.

Amid the talk of investors shifting money out of the US stock market and into Europe and Asia, Morgan Stanley reports that US asset allocators are much keener on Chinese equities than they were back in 2021.

In a note yesterday, Laura Wang, chief China equity strategist at the US firm, said that following a recent marketing trip to the East and West coasts of the US, she and her colleagues were struck by the sentiment shift.

“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. There are still concerns about China, such as deflation and its soggy real estate market. 

Describing the marketing trip, Wang said she and colleagues were “pleasantly surprised by the high level of investors’ interest in the China market at both the index level and targeting specific thematic and structural opportunities.”

“Over 90 per cent of the investors we 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,” Wang wrote.

A mix of forces have made investors more interested in China, such as the Asian country’s dominant global leadership in certain tech segments such as humanoids/robotics and biotech/drug development; moves by policymakers to stabilise the economy and nurture equities; improvements to financial liquidity, and a desire by investors to get away from a highly “US-centric” asset allocation.

US investors’ interest goes beyond the ADR [American Depository Receipt] and internet space to include the onshore A-share market for Chinese equities, Wang said.

“Historically, we had observed that US investors tended to focus more on the ADR space due to trading hour/time zone constraints,” Wang continued. (An ADR is a negotiable certificate issued by a US bank that represents shares in a non-US company. US investors can use these instruments to buy foreign companies' shares and receive dividends in US dollars on US stock exchanges, cutting out complexity from the process.)

“That said, there are a number of themes and segments that have been gaining more prominence over the last several years and [we] are now more exclusively traded in Hong Kong and the onshore A share market, including AI/semiconductors, humanoids/robotics, as well as New Consumption,” she said. 

(According to an internet definition, “New Consumption” means shifting patterns in how people acquire and use goods and services, driven by factors such as experiences, sharing, sustainability, and digital integration, moving beyond traditional models of ownership and consumption of physical products to include services, rentals, and virtual goods.”)

Wang added that the quantitative and macro hedge funds Morgan Stanley met with on its trip said they found trading Chinese equities via A-share exchange-traded funds and index future funds were a quick and straightforward way to play the market, particularly when they lacked the time or resources to pick individual stocks.

In a report published by this news service on 2 April 2025 – the same day that President Donald Trump unveiled his “Liberation Day” tariffs – European fund management group Amundi said that expectations for riskier assets in its capital markets report were revised up for 2025 from 2034. Almost 70 per cent of the risky asset classes covered in Amundi’s study are expected to deliver returns above 7 per cent. The highest equity returns are expected to come from Europe and emerging markets rather than from the US.