In a strategic shift, healthcare has been upgraded to 'equal-weight' from 'underweight', reflecting a focus on cash-generating assets amid uncertainties in China's economic policies and global trade dynamics.

This change highlights a move towards investments that are less vulnerable to external shocks, especially given the anticipated market volatility.

The brokerage's outlook emphasizes a preference for stable returns as fiscal policies remain gradual and geopolitical tensions continue to pose risks.

In contrast, the consumer discretionary sector has been downgraded to 'underweight' due to concerns over limited fiscal support and ongoing macroeconomic challenges.

Analysts have cautioned about potential disruptions stemming from US trade policies and upcoming elections, further reinforcing the pivot towards healthcare and defensive investments.

Morgan Stanley's economics team predicts an additional fiscal stimulus of around RMB 2 trillion for the remainder of 2024, followed by RMB 2–3 trillion in debt swaps in 2025.

However, uncertainties remain high, with expectations that China’s fiscal expansion will be both gradual and incremental.

In this context, China Resources Sanjiu has been added to both the China/HK and A-share thematic lists, as it is anticipated to benefit from stable earnings and reforms within China's state-owned enterprises.

Additionally, Morgan Stanley has replaced Anta Sports with Cosco Shipping Energy Transportation on its focus list, citing stronger fundamentals and growth potential driven by global oil shipping demand.