As Beijing's new regulations put global investors on edge, Morgan Stanley analysts have picked some stocks they think will benefit from those changes. From the crackdown on alleged monopolistic practices by China's tech giants, to rules protecting personal data, Beijing made it clear this summer that achieving "common prosperity" — moderate wealth for all, rather than just a few — is the political goal. In a report published Nov. 14, Morgan Stanley analysts picked stocks they think are most sensitive to positive changes from new regulation. All the stocks are rated buy, and listed in Greater China. Li Ning "Sportswear is a bright spot within consumption," said the analysts. Chinese athletic apparel company Li Ning is set for "strong market share gain in the growing sportswear industry," the analysts said. The investment bank has a price target on the stock of 111 Hong Kong dollars, 16% above Tuesday's close of 95.65 Hong Kong dollars. The analysts expect sportswear to perform better than most other consumer products next year, due to new government policies. Beijing plans to build or upgrade 1,000 sports parks across the country by 2025. This policy focus on the quality of Chinese residents' lives falls in line with the social aspect of the common prosperity theme, which Morgan Stanley categorizes as "social-economic stability." AIA Falling in that same socioeconomic category is insurance giant AIA Group, which Morgan Stanley predicts could rise nearly 52% from Tuesday's levels to a price target of 130 Hong Kong dollars a share. Helping China's rapidly aging population prepare for retirement is an important aspect of China's regulatory changes. During the national legislature gathering this year, authorities said they would further develop the country's pension system, partly by working with insurance businesses, the Morgan Stanley report said. AIA said earlier this month its China operations contribute the most to the group's new business, and the business unit saw double-digit growth in the first three quarters of the year from a year ago. In October, the Hong Kong-based insurer announced it was expanding in mainland China with regulatory approval to operate in Wuhan, Hubei province. The company said it already operates in Shanghai, Beijing, Guangdong, Shenzhen, Jiangsu, Tianjin, Hebei and Sichuan. Qi An Xin Part of China's sweeping regulatory crackdown this summer has focused on data privacy , with new rules coming from the increasingly powerful Cyberspace Administration of China. As businesses rush to comply with new rules on how to store and share data, it's creating demand for data security products. Morgan Stanley analysts noted that industry leaders in China reported more than 30% year-on-year growth in revenue in the third quarter on strong demand from customers in government, as well as telecom, financial and energy industries. Cybersecurity software and services company Qi An Xin Technology Group is Morgan Stanley's favorite stock in the data security sector. The analysts have a price target of 120 yuan — a 31% upside from Tuesday's levels. The analysts were even more encouraged over the weekend after the release of new details on data security regulation . "This is a meaningful starting point of converting high-level laws to actionable regulations," the analysts said in a separate Nov. 14 report. They expect greater demand for cybersecurity products such as dedicated services for regulators and big data exchange — and reiterated Qi An Xin as their top industry pick. — CNBC's Michael Bloom contributed to this report.
Travelers arrive at a train station ahead of China's upcoming Golden Week holiday following the coronavirus disease (COVID-19) outbreak, in Beijing, China September 29, 2021.
Thomas Peter | Reuters
As Beijing's new regulations put global investors on edge, Morgan Stanley analysts have picked some stocks they think will benefit from those changes.