Chinese stocks rebounded strongly in mid-April. Morgan Stanley's chief Asian stock strategist Guo Qiangsheng's team recently released the 2024 Mid-Year Outlook Report, drastically increasing the target prices for the Hang Seng Index and Hang Seng Index set at the end of last year. From the end of last year, the Hang Seng Index was expected to reach 16,000 points by the end of this year to a target price of 19,150 points in June 2025, an increase of 20%. Dama pointed out that in an optimistic scenario, the Hang Seng Index could rise to 2,500 points.

However, the Tama team still believes that Japanese stocks are more attractive than Chinese stocks. The bank's basic scenario target price for Japan's TOPIX Index will rise from 2,800 points to 3,200 points by the middle of next year, and the potential increase is still close to 17%.

Referring to the bank's report, Damo expects Hong Kong stocks to be in the most optimistic scenario by the end of last year. The Hang Seng Index could reach 18,500 points by the end of this year, and the Hang Seng Index is currently above this level. The bank's latest basic scenario target price, whether it is the Hang Seng Index or the National Index, is lower than the current price, reflecting that the bank is not optimistic that the increase in Chinese stocks will continue.

According to Dama, earnings per share growth in Japanese stocks is still more attractive than China and emerging markets. It is expected to maintain double-digit growth in the next two years. The return on equity (ROE) will reach 12% at the end of 2025, benefiting from: 1) the higher growth trend in the US; 2) Japan's nominal GDP is expected to be maintained; 3) the dollar is expected to fall back to 140 against the current 155 by the middle of next year; 4) continuing to benefit from geopolitical differentiation and artificial intelligence factors.

At the same time, Damo believes that the current market expects Chinese stocks to maintain a double-digit percentage increase in earnings per share this year, but corporate performance will disappoint the market, and the price-earnings ratio predicted by Chinese stocks has now returned to 10.4 times the 10-year average.

Editor/Jeffrey