Morgan Stanley says Chinese stocks defy the laws of gravity but you should own them anyway

Chinese stocks are out of control.

Investor demand is through the roof, Hong Kong’s Hang Seng topped 28,000 for the first time in seven years on Monday, and Chinese technology stocks are more expensive than Nasdaq stocks were at the height of the 2000 bubble.

In a note to clients on Tuesday, Morgan Stanley’s Jonathan Garner says China’s equity markets have rocketed off earth, as it were, leaving their global peers far behind.

And this incredible speed means investors need to act much faster:

“As in the recent movie Interstellar, time from the global investor perspective is running faster now for all China equity markets (Shanghai, Shenzhen, and Hong Kong). This means that investment strategies which might require several weeks to debate, plan and execute need instead to be acted on much faster — within a matter of days or even hours.”

Still, here’s what Morgan Stanley recommends:

Our overall feeling is that the bull market in China equities will continue both onshore and offshore,and we would recommend that clients to continue to have exposure … That said, we intend to pay very close attention to valuations, earnings and technicals going forward in this extremely dynamic situation.”

And here’s the climb of Hang Seng China Enterprises Index:

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