China Stock Market Outlook 2025: Predictions and Analysis

Morgan Stanley analysts are predicting a rocky road for China’s stock market in 2025. According to Investing, they foresee challenges like shrinking earnings, geopolitical tensions, and the possibility of tariffs.

In a recent note, the bank expressed concerns about deflationary trends and overall economic pressures affecting the A-share market. Investor confidence seems to be waning, with Morgan Stanley’s A-Share Sentiment Index dropping by 8 percentage points to 77%.

Turnover in key market segments like ChiNext and A-shares has also seen a decline of 10%-17% from November 21-27. On top of that, earnings forecasts continue to be revised downward, reflecting widespread market uncertainty.

One big macroeconomic worry is the potential for a 25% tariff on Chinese imports under the new U.S. administration. While exports remain strong due to competitive pricing, the housing market is showing mixed signals. Manufacturing activity, as measured by the PMI, is expected to hold steady, indicating moderate growth.

Looking ahead, Morgan Stanley expects challenges for China’s stock market in 2025. These could include ongoing earnings weaknesses, adjustments in currency value to counter tariffs, higher equity risk due to a more assertive U.S. stance, and potential U.S.-China tensions. Despite these headwinds, the bank prefers A-shares over offshore stocks for their resilience to global uncertainties and liquidity support from the PBOC’s programs.