A-Share Sentiment Drops amid Rising Tariff Concerns

Summary of Key Points from the Conference Call Industry Overview - The focus is on the A-share market in China, with a particular emphasis on investor sentiment and market conditions for 2025 [3][11]. Core Insights and Arguments - Declining Investor Sentiment: A-share sentiment has dropped significantly, with the weighted and simple Morgan Stanley A-share Sentiment Indicator (MSASI) decreasing by 8 percentage points to 77% and 7 percentage points to 66%, respectively, compared to the previous week [4]. - Earnings Pressure: There is a persistent downward pressure on earnings, leading to a more challenging equity market outlook for 2025. The consensus earnings estimate revision breadth is also trending downward [3][11]. - Market Volatility: The market is expected to remain volatile due to a mixed macroeconomic backdrop, including potential tariffs from the U.S. on major trading partners, which could impact the Chinese market [6][11]. - Net Inflows: Southbound net inflows into the A-share market continued for the 38th consecutive week, totaling US$2.6 billion** during the week of November 21-27, with year-to-date inflows reaching **US$89.6 billion [5]. Important Metrics and Data - Average Daily Turnover: The average daily turnover for ChiNext, A-shares, Equity Futures, and Northbound decreased by 10%, 11%, 17%, and 17%, respectively, during the week of November 21-27 compared to the previous cycle [4]. - PMI Expectations: The official manufacturing PMI is expected to remain steady at 50.1 in November, indicating continued expansion [6]. - Housing Market Trends: The housing market remains muted, with October housing prices showing a softer month-on-month drop, although land sales are weak, reflecting low developer confidence [6]. Strategic Recommendations - Preference for A-shares: The company recommends a preference for the A-share market over offshore markets due to its relative insensitivity to geopolitical uncertainties and direct liquidity support from the People's Bank of China [12]. - Investment Strategy for 2025: Key trades include buying more A-shares, focusing on stocks with better earnings and shareholder return outlooks, and avoiding stocks exposed to tariffs or supply chain risks [12]. Additional Considerations - Geopolitical Risks: The potential for further escalation in U.S.-China tensions and the impact of a weaker currency on the equity risk premium are highlighted as significant risks for the market [11]. - Profit-Taking: There may be profit-taking in the near term due to relatively good performance year-to-date, which could add to market pressures [11]. This summary encapsulates the critical insights and data points from the conference call, providing a comprehensive overview of the current state and outlook for the A-share market in China.