On December 7, following the release of the "New Ten articles" after the "20 articles," measures for epidemic prevention and control were further optimized, and more and more Wall Street institutions were optimistic about the prospects of China's economic recovery and the future trend of Chinese stocks.

After Wall Street institutions such as JPMorgan Chase & Co, Goldman Sachs Group and Bank of America recently sang long, Morgan Stanley also joined the ranks of bullish, saying that he was bullish on the Chinese stock market again after nearly two years.

Morgan Stanley said on Thursday that China's stock market will outperform the entire emerging market, or even the rest of the world.

Laura Wang, the bank's chief China equity strategist, wrote in a research note released on the same day: "We believe that the implementation of follow-up measures and other factors will help to continue to boost market sentiment. A number of positive developments and a clear path of reopening give us reason to upgrade stocks, and we believe that earnings and valuations of Chinese stocks are starting a recovery that will last for many quarters. The bank upgraded its rating on Chinese stocks to "overweight" from "holding wait-and-see" on Sunday.

Since expectations of continued optimization of epidemic prevention measures rose at the end of November, An and Hong Kong stocks have risen steadily, with the CSI 300 index up 7 per cent over the past two weeks and the Hang Seng index up 15 per cent over the same period. ETF iShares MSCI China (MCHI), the largest overseas Chinese stock, rose even more, by 20 per cent.

Todd McClone, head of emerging markets equities at William Blair, which is buying Chinese stocks, said: "by almost all valuation measures, Chinese stocks are oversold, undervalued and historically cheap. "

Morgan Stanley believes that there are other factors that will push Chinese stocks higher, including: the PCAOB is expected to release the results of the audit inspection of US-listed stocks as early as the end of December; US Secretary of State Lincoln plans to visit China; and the Central Economic work Conference is expected to further clarify the epidemic prevention path and macroeconomic targets for 2023.

The higher the Chinese stocks, the stronger the attractiveness.

The recent sharp rebound in Chinese stocks has been remarkable, with the Nasdaq china golden dragon index up 51% since the end of October.

The rebound in Chinese technology stocks, which have been hit hard before, is particularly pronounced. Many Wall Street analysts believe$Alibaba (BABA.US)$、$JD.com (JD.US)$和$Pinduoduo (PDD.US)$Internet giants have the most room to rise next year.

After plunging about 80 per cent, BABA's share price has shown signs of recovery in recent weeks, rebounding 52 per cent from its October low.

Analysts believe that whether the recent rebound can be sustained remains to be seen, but BABA's price-to-sales ratio has fallen to a low level of 1.9 times, which makes it difficult for some value investors to resist.

When valuations fall so low, even the smallest piece of good news can have a big impact on share prices. As Chinese stocks rise due to further optimisation of epidemic prevention measures and consumer spending is expected to recover, BABA and a broader basket of Chinese stocks once again cannot be ignored.

Wall Street has a "strongly recommended buy" rating on BABA, with 15 analysts covering the stock unanimously giving a "buy" rating, with an average target price of $133.73, meaning 51.4 per cent room to rise.

After plummeting 64 per cent in the past two years, JD.com 's share price has also rebounded in recent weeks, boosted by optimized epidemic prevention measures and sharply higher-than-expected earnings per share in the third quarter. Analysts believe that JD.com, like the early Amazon.Com Inc, has the ability to continue to improve profit margins.

With a price-to-sales ratio of just 0.6, JD.com is likely to be one of the biggest beneficiaries of a series of good news about China.

Wall Street also rated JD.com as a "highly recommended buy", with an average target price of $77.69, meaning 32.92% room for growth.

Pinduoduo was the hardest hit by the sell-off in Chinese technology stocks, with shares falling more than 83 per cent from high to low. But Pinduoduo's share price has been rebounding since it bottomed out earlier this year, with some investors still bullish on digital retail buying bargain-hunting and reaping handsome returns. Pinduoduo's share price is up about 265 per cent from its 2022 low.

Pinduoduo's earnings per share in the third quarter significantly exceeded expectations, which may attract more investors, and the share price is expected to rise further.

Pinduoduo, with a price-to-sales ratio of 6.4x and a price-to-earnings ratio of 30 times, is one of the more highly valued Chinese e-commerce companies, but analysts still find the stock attractive after six consecutive earnings that have sharply exceeded expectations, giving an average target price of $99.51, meaning 15.95 per cent upside.

Analysts believe the recent rally in Chinese stocks will rekindle investor enthusiasm for Chinese technology stocks.

The recovery in consumption brings optimistic expectations

The health of Chinese consumers is a matter of great concern to global investors. Investors who are bullish on China believe that previously pent-up demand will boost consumer spending as the government optimizes epidemic prevention and control measures.

Despite the impact of the epidemic on the Chinese economy, a survey of more than 6700 Chinese consumers conducted by McKinsey, the consultancy, this summer found that nearly half of the respondents were optimistic about the prospects for China's economic recovery, according to a report released on Thursday by the China team of consultancy McKinsey.

The McKinsey survey found that urban households have been accumulating savings, with 58 per cent saying they want to save for a rainy day, the highest rate since 2014. The savings deposits of Chinese urban residents increased by 14 trillion yuan ($2 trillion) in the first nine months of this year, according to McKinsey.

Although it will take some time for the economy to recover, McKinsey believes that the income of high-and middle-income households will grow at double-digit rates, and this group is expected to add another 71 million households, which will continue to drive consumption growth.

In addition, the McKinsey survey found that Chinese consumers' preferences have changed.

A growing number of Chinese consumers prefer local brands, McKinsey said, which could put pressure on foreign brands that once dominated the mass market.

McKinsey believes that Chinese consumers tend to buy domestic products, not because they are looking for cheaper alternatives, but because the quality and innovation of domestic brands have improved. China's domestic companies are also embracing the trend at a faster pace and are aggressively increasing related investment. In addition to factors such as geopolitics and rising costs, changes in consumer preferences are likely to further add to the challenges facing multinationals in China.

McKinsey also found that the decline in consumption has not yet occurred, but Chinese consumers are increasingly using money-saving shopping methods, including Wechat group buying and studio shopping. In addition, consumers have become more savvy, whether it is the various ingredients of skin care products or the down content of down jackets, they are well aware of the products they want to buy.

Consumer-oriented Chinese companies are expected to benefit from the recovery in consumer spending, and investors can find such Chinese companies that can adapt to changes in consumer preferences in the domestic A-share market.