Morgan Stanley(US:MS) Zhi Tong Cai Jing·2025-08-22 16:57Economic Growth Observation - The economic growth in China is expected to slow down, with Morgan Stanley predicting a year-on-year growth rate of approximately 4.5% for the third quarter [2] - Export growth is anticipated to decline from 7.2% in July to 5%-6% in August due to high base effects and a pullback in pre-emptive demand [2] - Domestic consumption remains weak, particularly in the automotive and home appliance sectors, despite the central government allocating around 600 billion yuan in subsidies [4] - The real estate market's ongoing decline is contributing to a "negative wealth effect," further dampening consumer confidence [5] - Infrastructure investment has seen a slight rebound, but its sustainability is questioned due to a decrease in net financing from government bonds [6][7] Market Sentiment - Despite the economic slowdown, market sentiment in the A-share market remains resilient, supported by ample liquidity and proactive policy measures [11] - The financial environment is characterized by a shift towards capital markets, with significant inflows into offshore Chinese stocks, estimated at 15-17 trillion yuan in the first half of 2025 [13] - There is a notable shift in residents' asset allocation from savings to capital markets, as indicated by a decrease in household deposits and an increase in non-bank financial institution deposits [15] Policy Response - The Chinese government is addressing core challenges, termed the "3Ds" (de-leveraging, insufficient demand, structural transformation), with targeted policy measures [18] - Recent government meetings have emphasized the continuity of cyclical policies and the acceleration of consumer support measures to bolster domestic demand [18] Central Bank Stance - The central bank's recent monetary policy report indicates a focus on the quality of liquidity management rather than simply injecting liquidity into the market [19] - The central bank has reduced the scale of net liquidity injections since June, reflecting a recognition of the current level of liquidity [19] Leverage Levels - Current leverage levels in the market are deemed reasonable, with the margin trading balance exceeding 2 trillion yuan (approximately 290 billion USD) but remaining below historical peaks [22] - The proportion of margin trading balance to free float market value is about 4.8%, slightly below the 10-year average of 4.9% [22] - There is a low risk of immediate policy intervention regarding market leverage, although vigilance is advised if leverage indicators rise significantly [26]