Wall Street has made a "collective turn"! Morgan Stanley has changed its stance to become bullish on China's stock market, and it seems the bull market is finally here.

Morgan Stanley strategists have lifted their rating on Chinese stocks to "neutral" from "underweight", echoing Wall Street peers in predicting a more sustainable rally for the market, driven by China's progress in artificial intelligence (AI). Laura Wang and her colleagues now recommend a "neutral" rating for the asset class and expect the MSCI China index to reach 77 by the end of 2025, up from a previous target of 63, implying a 4% rise from Wednesday's close. The index entered a bull market earlier this month. "China equities (especially offshore) have finally undergone a structural transformation, which gives us more conviction that the recent improvement in MSCI China is sustainable than when the market rallied in September last year," strategists wrote in a report on Wednesday. The upgrade is a noteworthy shift for Morgan Stanley, which has long been sceptical of Chinese stocks, and suggests a fundamental change in the way global investors approach the market, even if the bank's stance barely changed last October, when China's monetary stimulus triggered a global rebound — it just trimmed its short position. Earlier this week, Goldman raised its target for the MSCI China index, while Morgan Stanley and UBS also published bullish views. Morgan Stanley strategists pointed to corporate efforts to boost share prices, including share buybacks, as well as a shift in regulation from "clean-up to revival", and China's AI capabilities, as factors driving the upgrade. The bank also raised its target for the Hang Seng China Enterprises index to 8,600 from 6,970, and for the Hang Seng index to 24,000 from 19,400, while maintaining its forecast of 4,200 for the CSI 300 index.