China’s Bear Market Has a Stopwatch—and the National Team May Set the Timer

Morgan Stanley sees offshore Chinese shares falling another 10% to 15%, which would bring valuations to about 8 times forward earnings, while mainland shares could de-rate to 10-11 times. The CSI 300 trades at 11.6 times and the Hang Seng at 9.5 times, with the bank expecting state-backed support to make A-share stabilization more visible within another month or two.

The forecast follows a difficult 2026 for Chinese stocks, with Google Finance and BeInCrypto data showing the CSI 300 down 13.44% and the Hang Seng down 11.87%. The CSI 300 entered a bear market last week. In a Sunday note reported by Bloomberg, Morgan Stanley linked further downside to weaker earnings: Bloomberg data show 2026 profit forecasts for MSCI China members down more than 4% since the end of March, while reported results have missed estimates by 9% on average. CATL’s profit miss highlighted pressure from weak spending and price wars, while Stanley Tang of Sumitomo Mitsui DS Asset Management favors Japanese, Korean, and Taiwanese firms for better earnings.

Beijing has kept stimulus measured, with growth on target, and officials have turned to state funds known as the national team to steady the market. Morgan Stanley said markets have tended to bottom one to two months after high-profile national team purchases, a pattern that held when policymakers also publicly pledged 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 because of that support.

Past interventions illustrate how the clock could run. In early 2024, Central Huijin pledged more ETF buying after the CSI 300 hit a five-year low, and 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, while Berenberg’s Ulrich Urbahn remains cautious, citing weak profitability. “It is too early to conclude that the worst is over,” Urbahn added. Hong Kong also faces the Federal Reserve’s October 28 decision, given its sensitivity to bond yields, as third-quarter results continue arriving and MSCI China remains on track for its second-worst miss in two years.