CSI 300 index rises 2.1% to 4,469.22 at close

CSI 300 index rises 2.1% to 4,469.22 at close

The CSI 300 index, a key benchmark for China's A-share market, rose 2.1% to close at 4,469.22 on July 2, 2025. This performance comes despite the index testing decade-long highs, according to Morgan Stanley analysts. The analysts cite several factors contributing to the rally, including improved liquidity, a shift in investor sentiment, and optimism over policy support.

Morgan Stanley notes that the Shanghai Composite has gained 11% year-to-date, crossing 3,700 on August 15, a level last seen in late 2015. The large-cap CSI 300 index, which includes 300 of the largest and most liquid A-shares listed on the Shanghai and Shenzhen stock exchanges, has climbed above 4,200 this year, up 8% year-to-date. This index level was briefly touched in September 2024 and January 2023 but momentum faded due to weaker growth.

Unlike previous rallies, the current rally is supported by a more favorable bond market environment. Onshore long-term bond yields have been picking up since June, with China's 10-year and 30-year yields rising by 15 and 27 basis points to 1.78% and 2.11%, respectively. This uptick suggests an improved investor outlook for the long-term macroeconomic picture, unlike prior rallies where bond yields showed skepticism.

The analysts highlight three key drivers for the current rally: improving liquidity, policy momentum, and sentiment shifts. Morgan Stanley's proprietary Free Liquidity Indicator turned positive in June 2025, marking the first time since early 2024. Additionally, China's "anti-involution initiative" has been building momentum, supporting expectations for price stabilization and stronger supply-demand dynamics.

Morgan Stanley continues to prefer onshore A-shares over offshore equities, citing the improving macroeconomic outlook and policy support.

References:
[1] https://www.investing.com/news/stock-market-news/csi-300-could-rally-further-despite-testing-10year-highs-morgan-stanley-4202573