Morgan Stanley reiterated a positive stance on Hong Kong markets, identifying late July and August as the window when a durable rebound could take hold. The bank said accelerating earnings growth in the technology sector should help anchor the recovery, provided global market volatility calms.
Sentiment measures showed some weakening in the run-up to this period. The weighted MSASI decreased by 7 percentage points versus July 15, arriving at 37%. Its one-month moving average, the weighted MSASI 1MMA, also slipped by 2 percentage points over the same interval, to 57%.
Trading metrics between July 15 and July 22 revealed a mixed picture across Chinese markets. ChiNext turnover contracted by 6% to 667 billion yuan, while overall A-share turnover declined 7% to 2,677 billion yuan. Margin transaction outstanding moved down 6% to 2,729 billion yuan. By contrast, equity futures turnover climbed 8% to 734 billion yuan.
Technical and estimate indicators offered limited reassurance. The 30-day relative strength index (RSI) held steady through the period. Consensus earnings estimate revision breadth remained negative, although it recorded a slight improvement from the prior week.
Capital flows also reflected continued investor engagement. Southbound net inflows amounted to $1.6 billion for the seven-day span from July 16 to July 22. Month-to-date net inflows had reached $11.1 billion, and year-to-date inflows totaled $46.6 billion, which Morgan Stanley noted equates to 46% of inflows recorded in the same period last year.
Analysts at Morgan Stanley flagged two situational factors that coincided with softer sentiment: the market's pause ahead of the July Politburo meeting and the approach of the CXMT initial public offering. These events, the firm indicated, contributed to the MSASI easing before the anticipated recovery window.
In sum, Morgan Stanley's outlook balances the firm's view that technology-sector earnings momentum can underpin a sustainable rebound in late July and August against recent softness in sentiment and turnover measures. The timing hinge remains the abatement of global market volatility, after which the bank expects the improving tech earnings backdrop to support a recovery.