It has been a tough year for Chinese stocks, with the CSI 300 down 13.44% in 2026. The Hang Seng has shed 11.87%, and Morgan Stanley doesn’t think the selling is done.
The bank has estimated how much further prices could fall, and which move could signal a bottom.
Earnings Keep Pulling the Floor Lower
The CSI 300 entered a bear market last week. In a Sunday note reported by Bloomberg, Morgan Stanley sees offshore shares falling another 10% to 15%. That would bring valuations down to their historical level of about 8 times forward earnings.
For mainland shares, the bank expects a similar de-rating to about 10-11 times. The CSI 300 trades at 11.6 times, the Hang Seng at 9.5 times.
Weaker earnings add to that pressure. Bloomberg data show 2026 profit forecasts for MSCI China members down more than 4% since the end of March. Reported results have missed estimates by 9% on average.
Weak spending and price wars drive the squeeze, as CATL’s profit miss showed. Stanley Tang of Sumitomo Mitsui DS Asset Management favors Japanese, Korean, and Taiwanese firms for better earnings.
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Beijing’s Buyers Hold the Key to the Timing
Despite weak profits, Beijing has kept stimulus measured, with growth on target. Officials have turned to state funds known as the national team to steady the market.
Morgan Stanley’s timeline rests on that buying. Markets have tended to bottom one to two months after high-profile national team purchases, the bank said. The pattern held when policymakers also pledged publicly to stabilize stocks.
Central Huijin, the lead state investor, had about $188 billion left last week, Bloomberg Intelligence estimated.
“This more proactive messaging and still ample dry powder, based on historical experience, suggests that stabilization of the A-share market could be more visible now, likely within another month or two, or so,” Morgan Stanley said.
The bank favors mainland shares partly for that support.
Past Rescues Show How the Clock Could Run
In early 2024, Central Huijin pledged more ETF buying after the CSI 300 hit a five-year low. The index rebounded from there.
In 2015, the market bottomed only a year after about 1.24 trillion yuan of state buying.
Bridgewater’s China arm sees third-quarter declines as mostly liquidity-driven, with valuations not high. Berenberg’s Ulrich Urbahn remains cautious, citing weak profitability.
“It is too early to conclude that the worst is over,” Urbahn added.
Hong Kong faces the Federal Reserve’s October 28 decision, given its sensitivity to bond yields. Third-quarter results also keep arriving, with MSCI China on track for its second-worst miss in two years.
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The post Morgan Stanley Puts a Number and a Timeline on China’s Stock Bottom appeared first on BeInCrypto.
