Morgan Stanley has published a report indicating that sentiment indicators for A-shares improved following the Lunar New Year holiday, driven by a rebound in trading volume and rising expectations for the upcoming "Two Sessions." However, offshore Chinese stocks continue to face challenges due to concerns about AI disruption and competitive pressures. Key factors to monitor include improvements in AI capabilities among major platform companies, better profitability, and stability in external markets. Despite the improved sentiment in A-shares, offshore Chinese stocks remained under pressure this week, particularly the Hang Seng Tech Index. Morgan Stanley attributes this primarily to the significant weighting of service-related sectors in the Hang Seng Index, which are notably affected by global AI disruption narratives. Additionally, intensified price competition among e-commerce platforms has dampened the profit recovery outlook for large platform companies. Recent developments in e-commerce and AI technology have also prompted investors to reduce exposure to direct competitors within the broader internet and software sectors. Morgan Stanley maintains a positive medium-term outlook for both Hong Kong and A-shares but suggests short-term pressure on Hong Kong stocks may persist unless three conditions materialize: 1) breakthroughs in large language models by major internet firms such as Tencent and Alibaba, restoring investor confidence in AI capabilities; 2) a more positive Q1 earnings season, including more aggressive capital expenditure plans following the resumption of H200 chip procurement or the reinstatement of share buybacks; and 3) greater stability in the U.S. stock market. Regarding the improved sentiment in A-shares, Morgan Stanley cited post-holiday positioning needs, a pause in large-scale selling by "national team" investors, and optimism surrounding the Two Sessions, particularly in areas such as technological innovation, anti-involution policies, and measures to boost domestic consumption. Meanwhile, domestic macroeconomic data presents mixed signals. Overall Lunar New Year consumption improved due to the extended holiday, but spending remains cautious. Total tourist numbers increased by 19% year-over-year, though per capita spending declined slightly by 0.2%. Average daily tourist numbers rose by 5.7%, while average daily per capita spending fell by 11.3%, reflecting continued budget-conscious behavior. Looking ahead to the Two Sessions, Morgan Stanley's China economics team expects the national GDP growth target to be around 5% this year. Although some provinces have lowered their targets, the move aims to build confidence at the start of the 15th Five-Year Plan. However, maintaining a relatively high growth target does not necessarily imply stronger stimulus, as fiscal policy is expected to remain broadly consistent with 2025, with a budget deficit ratio of 4% and an expanded deficit ratio of 11.6%. Policy measures are likely to remain centered on the "supply side," prioritizing technology and infrastructure, while consumption and property measures are expected to serve as "guardrails" rather than aggressive stimulus. Market expectations are for the full 15th Five-Year Plan to focus heavily on technology. Any specific targets for "consumption as a percentage of GDP" or a significant increase in social welfare spending would be viewed as positive surprises.