Analysts at Morgan Stanley are out today with a report that identifies Chinese equities as a massive long-term growth opportunity for investors, driven by a growing middle class and rapidly evolving economy.

The rise will be bumpy, says the firm, but upcoming economic reforms and the rise of consumption and services will drive meaningful growth. From Bloomberg:

“The key message of this report is that China can transition to high income status, something few other EMs have achieved,” Morgan Stanley strategists led by Jonathan Garner wrote in a 118-page macro outlook received Tuesday. “It is likely that over the next 10 years MSCI China can keep up its long track record of outperformance of EM.”

Morgan Stanley also reiterated its 2017 price target for the benchmark Shanghai Composite Index to reach 4,400 this year. That index sits around $3,217 right now, so the firm’s target implies a massive 37% upside from current levels.

By 2027, the analysts also believe China will reach high-income status, joining a very small group of large-sized countries to hit that level in the past few decades. This, in turn, will continue to drive the outperformance of MSCHI versus wider emerging market funds, the firm said.

The iShares MSCI China Index Fund (NASDAQ:MCHI) was trading at $48.33 per share on Tuesday morning, down $0.44 (-0.90%). Year-to-date, MCHI has gained 10.52%, versus a 4.01% rise in the benchmark S&P 500 index during the same period.

MCHI currently has an ETF Daily News SMART Grade of A (Strong Buy), and is ranked #2 of 32 ETFs in the China Equities ETFs category.

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