Further de-leveraging or positive development loop? How to invest?

Research evidence excerpt

Further de-leveraging or positive development loop? How to invest?

Idea

July 9, 2026 10:00 PM GMT

Morgan Stanley Asia Limited+MChina Financials | Asia Pacific Richard Xu, CFA

Equity Analyst

Further de-leveraging or Richard.Xu@morganstanley.comChiyao Huang +852 2848-6729

Chiyao.Huang@morganstanley.com +852 3963-4624

positive development loop? Beryl Yang

Research Associate

Beryl.Yang@morganstanley.com +852 3963-2224

How to invest? Rick Zhao

Rick.Zhao@morganstanley.com +852 2239-7033

We believe the exit of certain stimulus policies will not derail Chenqian Liu

growth but help build a stronger foundation for a positive ResearchChenqian.Liu@morganstanley.comAssociate +852 3963-0359

financial development loop. After China banks’ outperformance,

we shift our preference to brokers, then insurance firms, as we

expect a prolonged active market this cycle.

While financial risks are much better controlled, we see ongoing need for de-

China Financials

leveraging towards a more sustainable positive development path. After better-

Asia Pacific

than-expected 1Q26 growth and strong exports, policymakers in 2Q26 focused on Industry View Attractive

rationalizing effective stimulus: removing the inclusive financing loan target, What’s Changed

tightening LGFV credit, auditing artificial loan and deposit growth rather than China International Capital

promoting loan growth, and strengthening enforcement of social security Corp. Ltd. (3908.HK) From To

Price Target HK$30.20 HK$31.60

contribution requirements. We believe ongoing de-leveraging amid strong external

CITIC Securities Co.

demand will support sustainable financial system growth over time, and we view (600030.SS) From To

TSF growth of ~6% as a more desirable and sustainable medium-term level. Price Target Rmb37.30 Rmb40.10