For a long time, understanding the temperature of the Chinese stock market has been based on anecdotal evidence. Morgan Stanley has quantified it with the sentiment index which is currently at 37.

Compared to the peak – 100 in 2015, the market is not overheating right now, based on Laura Wang, China Equity Strategist at Morgan Stanley.

If this index stays anywhere between 20 and 70, it will be a "good enough level" to support a long-term sustainable growth, Wang said.

Morgan Stanley keeps bullish on Chinese equity market. According to Wang, "A-share deserves a slight premium versus emerging market," thanks to the strong policy support, improving the condition of liquidity and strong fund inflows from foreign investors.

Morgan Stanley saw potential for the CSI300, an index tracking the top 300 stocks on the Shanghai and Shenzhen stock exchanges, to rise another seven percent.

"Actually we turned bullish on A-Share market since December last year… Our target price for CSI300 is 4,300 this year. That implies another seven percent upside, which is quite sizeable I believe," she told CGTN.

She said that there are "multiple green shoots on different fronts" to support that positive forecast.

"We have a strong conviction in terms of policy support from the top-down level. And we have been seeing at the beginning of this year, like RRR cut, VAT cut as well as the social pension contribution cut for the corporate burden side," Wang explained.

She also noted that those fiscal and liquidity supports would gradually take effect in the second half of this year and "we are likely to see more earnings growth trajectory, sort of upward trend."

Morgan Stanley recently predicted that China's A-share market would attract 70 to 125 billion U.S. dollars' worth investment this year, breaking the previous record. "FTSE Russell index event as well as index expansion by MSCI is important. But we think that the active fund inflows will be even more important this year," Wang mentioned.

"Foreign investors own extremely low share of total A-share market cap, around 2.6 percent. That is very low compared to how much they own of other emerging markets, 30 to 40 percent. So we believe this is the very beginning of a very long journey of global asset allocation," she further explained.

As to uncertainties, Wang said that some of industry reforms are necessary in the long term for the healthy growth, but may lead to revenue and earnings uncertainties in the near term. "We may recommend investors to be more careful and cautious when they invest in these sectors."

And trade uncertainties between China and the U.S. also disturb the market. Morgan Stanley believed that China and the U.S. would reach a framework for both countries to stay in the dialogue. "We think the situation is moving toward achieving some deals. Things seem to be moving in the right direction," she suggested.