SHANGHAI, March 26 (Reuters) - Wall Street firm Morgan

Stanley ( MS ) raised on Wednesday its index targets for Chinese

shares for the second time this year, citing improved earnings

growth forecasts and a more optimistic outlook for the economy

and currency.

The bank upgraded its year-end index targets for Hong Kong's

benchmark Hang Seng Index, Hang Seng China Enterprises

index, MSCI China index, and China's

blue-chip CSI300 index to 25,800, 9,500, 83, and 4,220

points, respectively.

"The new and higher index price targets are driven by both

moderate increases in earnings growth forecasts and higher

valuation targets," the U.S. bank said in a note.

It also cited "improved macro and FX outlook forecasts".

Morgan Stanley ( MS ) noted that earnings results for the fourth

quarter of last year from companies tracked by the MSCI China

index "are showing a solid 8% net beat", both in terms of the

number of companies and weighted earnings - marking the first

time in 3-1/2 years.

Chinese stocks have gained momentum this year, with the MSCI

China Index rising about 16% so far, outperforming global peers.

This rise is fuelled by investor optimism surrounding progress

in generative AI and Beijing's stimulus measures aimed at

boosting consumption and supporting the broader economy.

Developments in trade relations between the United States

and China have been a key focus for investors. The White House

said last week that U.S. President Donald Trump still intends to

impose new reciprocal tariffs on several U.S. trading partners,

starting April 2.

Morgan Stanley ( MS ) also raised its forecast for China's economic

growth in 2025 to 4.5%, up from the previous estimate of 4%. The

brokerage revised its yuan predictions to 7.35 per dollar by

mid-2025 and 7.50 by the end of this year, compared with its

prior forecast of 7.50 and 7.60, respectively.

"We have always made the point that currency strength serves

as an important factor for Chinese equities, especially for the

offshore market.

"This is because foreign investors' funding costs are

usually in U.S. dollar terms, which means a relatively stronger

or less weak currency should be a positive catalyst from an

asset allocation perspective."

Goldman Sachs ( GS ) shared a similar outlook, expecting

"more fundamental upside for China stocks."

"However, we expect the bull market to slow and

profit-taking pressures to build as the U.S.-China policy and

geopolitical calendar turns active once again in the coming

weeks," GS said in a note on Wednesday.