Investment Rating - The industry investment rating is "In-Line" [7] Core Insights - Market sentiment towards AI is perceived to be ahead of fundamentals, with a notable enthusiasm following the recent elections, despite a lack of detailed plans [1] - The new government's focus on AI is expected to positively impact the industry, with plans for W100 trillion in AI investments highlighted during the election [3] - The government is anticipated to support AI-related investments through shared resources and subsidies, which could enhance competitiveness for participating companies [4] Summary by Sections AI Market Sentiment - AI-related stocks experienced significant gains, with Naver rising by 20% and other internet stocks also showing strong performance, indicating a "buy first, ask questions later" sentiment [2] Government Initiatives - The government's push for AI aims to improve Korea's competitiveness in the sector, with a focus on developing 'sovereign AI' to provide low-cost or free access to advanced AI services for citizens [3][5] Investment Opportunities - There is a growing demand for AI infrastructure, particularly data centers, which are expected to benefit from government policies facilitating large-scale projects [6] - Companies like KT, SKT, and LGU are identified as major players in the data center space, poised to capitalize on AI opportunities [6] Company Ratings - The report includes specific ratings for various companies within the sector, with notable mentions such as: - Coupang Inc: Overweight - Kakao Corp: Overweight - NCSOFT Corp: Overweight - SK Telecom: Overweight - Naver Corp: Equal-weight [64]

Investment Rating - The report does not explicitly provide an investment rating for the industry or specific companies covered Core Insights - The recent US-China trade agreement is viewed as a tactical pause rather than a comprehensive resolution, indicating ongoing tensions between the two nations [2][4] - The agreement addresses critical dependencies in technology and resources, with China relying on semiconductor imports and the US dependent on rare earth minerals [4] - Economic forecasts suggest US GDP growth of 1.0% in 2025 and 2026, while China's real GDP growth is expected to slow to 4.5% in 2025 [2][5] Summary by Sections US-China Trade Relations - The trade agreement is limited and does not resolve fundamental disagreements, with US tariffs on China imports remaining significantly higher than at the start of the year [4] - Both countries are attempting to reduce dependencies, but progress is slow, with China investing in its semiconductor industry and the US seeking alternative rare earth supplies [4] Economic Outlook - The report anticipates that tariffs will lead to a rise in goods prices, affecting inflation rates, with headline PCE expected to rise to 2.9% and core PCE to 3.3% in 2025 [2] - The US faces a weaker growth outlook due to higher tariffs, which may pressure the dollar and Treasury yields lower, while creating uncertainty about future inflation [6] Market Positioning - Investors are advised to position for slower growth and uncertainty in US-China relations, with potential opportunities in currency and Treasury markets [6] - The report suggests that the current economic environment may lead to a steeper yield curve as longer-maturity yields reflect inflation uncertainty [6]

Investment Rating - The investment rating for China Resources Microelectronics Limited has been upgraded from Underweight to Equal-weight with a price target increase from Rmb28.10 to Rmb40.00 [1][6]. Core Insights - China's electric vehicle (EV) growth is leading globally, with the domestic EV market being the largest. The report identifies three key investment areas in the auto semiconductor sector: power discrete, ADAS (Advanced Driver Assistance Systems), and MCU (Microcontroller Unit) [1][25]. - The report highlights that China consumes 56% of global EV production, with an expected increase in EV penetration from 28% in 2024 to 42% by 2030 [2][28]. - Local auto semiconductor companies are expected to outgrow global competitors due to rising EV penetration and localization needs [2][25]. Summary by Sections Investment Themes - Three key investment areas identified are power discrete, ADAS, and MCU. Chinese semiconductor vendors accounted for less than 5% of global auto semiconductor supply in 2024, with a self-sufficiency ratio of only 15% [4][44]. - Power discrete components are crucial, with significant progress in IGBT and SiC substrates. The report anticipates further opportunities in MOSFET and SiC devices [4][45]. - The ADAS segment is expected to experience the highest growth CAGR, benefiting from local SoC vendors and peripheral chip manufacturers [4][48]. Market Dynamics - The report notes that the majority of auto semiconductor components are produced using mature nodes, leading to fewer supply constraints [3][4]. - The competitive landscape is evolving, with global semiconductor companies implementing China-for-China strategies, presenting both opportunities and challenges [5][33]. Stock Implications - The report recommends several companies under the identified investment themes, including Starpower, Yangjie Technology, Horizon Robotics, Alchip, Will Semi, and GigaDevice, indicating a positive outlook for these stocks [6][26]. - The report emphasizes the importance of local companies in capturing market share as they are more willing to sacrifice margins for growth [5][33]. Future Projections - The report projects that China's auto semiconductor self-sufficiency will increase to 28% by 2027, indicating significant growth potential [15][44]. - The expected growth in the BEV market size and semiconductor content per vehicle is anticipated to drive demand for local semiconductor suppliers [28][42].

June 18, 2025 09:00 PM GMT Jonathan.Garner@morganstanley.com +65 6834-8172 China Equity Strategy | Asia Pacific M Idea Focus List Changes – China/HK We add PICC P&C (2328.HK) to our China/HK Focus List and remove Pop Mart (9992.HK) from the list Adding PICC P&C (2328.HK): PICC P&C is China's biggest P&C player with >30% market share. Morgan Stanley China insurance analyst Rick Zhao believes the company will maintain competitiveness in the market due to: 1) a strong balance sheet and healthy book value growt ...

Investment Rating - The industry investment rating is Attractive [5]. Core Insights - The report emphasizes that the market has become overly negative on US Industrials' ability to maintain price and cost positivity in light of Trump 2.0 tariffs, a view that has gained acceptance [3][9]. - There is a positive outlook for Q2 EPS, with the group better positioned to defend margins rather than just operating profit, supported by an excess inventory buffer [3][9]. - The report identifies that US Industrial pricing power is an underappreciated driver of operational durability, which is expected to manifest in upcoming quarters [9]. Summary by Sections Price Changes and Tariffs - The report tracks cumulative changes in the Producer Price Index (PPI) over the last three months, indicating a growth of 90 basis points, outpacing the Consumer Price Index (CPI) by 40 basis points [8]. - The verticals that are realizing the strongest price increases due to Trump 2.0 tariffs include Switchgear, Valves, Electrical Equipment, and Non-Residential Light Fixtures, particularly those exposed to metal inputs and Chinese imports [8]. Margin Defense and EPS Growth - The report suggests that corporations are reluctant to roll back prices due to uncertainty around future policy, indicating that prices are likely to increase further into Q3 [7]. - The report highlights that not a single vertical has given back price since the end of 2022, despite commodity deflation and broad channel destocking [11]. Historical Performance and Future Outlook - The report notes that since 2018, the coverage has grown operating profit at 1.7 times the rate of sales, indicating strong pricing power [11]. - The best-positioned companies to convert inflation into profits include ETN, AYI, FAST, GWW, HUBB, WSO, and TT [9].

Investment Rating - Industry View: In-Line [5] Core Insights - The semiconductor industry is experiencing unprecedented demand driven by AI advancements and geopolitical tensions [3][5] - China's AI semiconductor market is expected to see significant growth, with local GPU revenue projected to reach Rmb287 billion by 2027 [21][19] - The overall AI semiconductor market is anticipated to deliver over 30% CAGR from 2023 to 2030, with inference AI semiconductors growing at 55% CAGR [78][77] Summary by Sections China AI Semi Demand and Supply - The top six companies' capital expenditures are forecasted to grow 62% YoY to Rmb373 billion [10] - China's GPU self-sufficiency ratio was 34% in 2024 and is expected to reach 82% by 2027 [16] - The total addressable market (TAM) for China's cloud AI is projected to be US$48 billion by 2027 [18] Semiconductor Solutions and Technology Trends - Moore's Law is expected to continue with chip scaling to 3nm/2nm for better power efficiency [78] - Advanced packaging technologies like CoWoS and SoIC are being utilized to increase data speed and memory bandwidth [78] - The EDA market in China is projected to grow at a 12% CAGR from 2023 to 2030, reaching US$3.3 billion [29] Investment Opportunities - AI semiconductors are expected to account for approximately 34% of TSMC's revenue by 2027 [148] - The demand for custom AI semiconductors is increasing, driven by major cloud service providers and tech companies [120][121] - The global semiconductor market size may reach US$1 trillion by 2030, with AI semiconductors being a major growth driver [59]

June 17, 2025 02:00 PM GMT Internet | North America Where Are We Trading Now: After a Geopolitically Charged Week Internet names fell -1% last week (SPX/NDX flat/-1%) led by AMZN/GOOGL/META -1%/+1%/-2% as geopolitical tensions weighed on the market in the back half of the week. APP -13%, CHWY -14% (post-EPS move), and DUOL -7%. AMZN/GOOGL/ META 30X/17X/25X '26 EPS (-4%/-6%/+12% vs TTM avg). We would greatly appreciate your 5-star vote in the Internet Large Cap and Internet SmidCap categories in this year's ...

Investment Rating - The report maintains an "Overweight" (OW) rating on several companies in the AI ASIC supply chain, including Accton, Wiwynn, Bizlink, and King Slide in downstream systems, as well as TSMC, Broadcom, Alchip, MediaTek, Advantest, KYEC, Aspeed, and ASE in upstream semiconductors [1][11]. Core Insights - The AI ASIC market is expected to grow significantly, with NVIDIA outpacing the ASIC market in 2025, generating enthusiasm for ASIC vendors. Asian design service providers like Alchip and MediaTek are anticipated to gain market share due to their efficient operations and quality services [2][21]. - The global semiconductor market is projected to reach $1 trillion by 2030, with AI semiconductors being a major growth driver, estimated to reach $480 billion, comprising $340 billion from cloud AI semiconductors and $120 billion from edge AI semiconductors [21][22]. Summary by Sections AI ASIC Market Developments - AWS Trainium: Alchip has taped out the Trainium3 design, with wafers already produced. Alchip is expected to have a strong chance of winning the 2nm Trainium4 project [3][15]. - Google TPU: Broadcom is expected to tape out a new 3nm TPU after the Ironwood (TPU v7p) enters mass production in 1H25, while MediaTek is also preparing for a 3nm TPU tape-out [4][18]. - Meta MTIA: Preliminary volume forecasts for MTIAv3 are expected in July, with considerations for larger packaging for MTIAv4 [5]. Downstream and Upstream Suppliers - Downstream suppliers for AWS Trainium2 include Gold Circuit for PCB boards, King Slide for rail kits, and Bizlink for active electrical cables. Wiwynn is expected to see 30-35% of its total revenue from Trainium2 servers in 2025 [6][11]. - Key upstream suppliers include TSMC for foundry services, Broadcom for IP and design services, and Alchip for back-end design services [11][10]. Market Size and Growth Projections - The AI semiconductor market is projected to grow to $50 billion by 2030, representing 15% of cloud AI semiconductors. This indicates a significant opportunity for AI ASIC vendors despite NVIDIA's dominance in the AI GPU market [21][24]. - The report estimates that the global AI capex total addressable market (TAM) for 2025 could reach around $199 billion, driven by major cloud service providers [26][58]. Financial Implications - Alchip's revenue from Trainium3 chips is estimated to be $1.5 billion in 2026, with expectations of continued growth in the AI ASIC market [18][21]. - MediaTek's revenue from TPU projects is projected to grow significantly, with estimates of $1 billion in 2026 and potential growth to $2-3 billion in 2027 [19][21].

Investment Rating - The report maintains a cautious outlook on copper prices, forecasting a decline towards $9,100/mt in Q3 2025 before stabilizing around $9,350/mt in Q4 2025 [2][4]. Core Insights - The tightening of copper fundamentals in 1H25 is attributed to two main factors: increased US imports ahead of potential tariffs and front-loaded demand from China [2][4]. - The report anticipates a payback in 2H25 from these dynamics, leading to a more cautious stance on copper prices for the remainder of the year [2][4]. - Visible copper inventory is described as significantly dislocated and imbalanced, rather than exceptionally tight globally [2][5]. - The US is projected to import approximately 430 kmt of excess refined copper in 1H25, which is expected to lead to a substantial inventory build [2][11]. - The report expects a multi-month de-stocking cycle in the US following the announcement of copper tariffs, which will shift supply dynamics towards Asia [2][13]. - Chinese copper demand growth has been robust at around 7% year-on-year, but is expected to slow in 2H25 due to various headwinds [2][14]. - The report highlights a potential decline in demand from the air conditioning and white goods sectors, as well as a significant slump in solar demand, which could lead to flat or slightly negative overall demand growth in China for 2H25 [2][19][24]. - Despite the anticipated unwind of tightening factors, overall copper supply growth remains constrained, supporting prices above $9,000/mt [2][25]. Summary by Sections US Copper Imports and Tariffs - The report expects a 25% tariff on US imports of refined copper and copper products to be announced by the end of July 2025 [2][27]. - Following the tariff announcement, US imports are expected to drop significantly, leading to a shift in trade flows towards Asia [2][36]. Chinese Demand Dynamics - Chinese copper demand growth is projected to be around 3% for the full year 2025, with a significant slowdown expected in 2H25 [2][14]. - The report notes that while grid demand will remain strong, other sectors such as housing and solar are likely to face challenges [2][19][24]. Price Forecasts - The report provides a quarterly price forecast for copper, estimating $9,100/mt for Q3 2025 and $9,350/mt for Q4 2025 [2][49]. - Overall, the report suggests that absent a severe downturn in the macroeconomic environment, copper prices will remain supported despite the anticipated corrections [2][25].

Investment Rating - The report does not explicitly provide an investment rating for the industry or assets discussed Core Insights - Uncertainty surrounding US tax and trade policy, along with significant US dollar weakness, suggests a potential global shift away from US dollar-denominated assets [1] - The cross-currency (XCCY) basis market can be utilized to gauge demand for US dollars and related assets, indicating a trend where investors show less interest in USD-denominated assets while favoring EUR and JPY assets [7][15] - The report anticipates that the tightening trend in the XCCY basis will persist until Federal Reserve rate cuts enhance the attractiveness of USD-denominated assets on a foreign exchange-hedged basis [16][97] Summary by Sections Executive Summary - In times of global market stress, investors typically seek safe haven currencies, with the USD historically reinforcing comfort in USD-denominated assets [8] - Post "Liberation Day" on April 2, 2025, the USD showed unusual depreciation against other currencies, raising questions about its safe haven status [11][68] XCCY Basis Market Dynamics - The XCCY basis reflects offshore demand for long-term USD funding and onshore demand for non-USD-denominated assets [7][14] - Recent movements in the XCCY basis indicate a reduced appetite for USD-denominated assets and an increased interest in EUR and JPY assets [15][16] - The report outlines key drivers of the XCCY basis, including supply and demand factors for both currencies, with negative spreads indicating a premium for borrowing USD [22][24] Key Drivers of XCCY Basis - Short-term drivers include USD liquidity, regulatory constraints, and demand for foreign assets, while medium- to long-term drivers focus on overseas asset demand and issuance-related factors [25][35][46] - The report emphasizes the importance of monitoring the XCCY basis as it provides high-frequency signals regarding foreign demand for USD and USD-denominated assets [65][77] Recent Market Observations - Following the announcement of reciprocal tariffs, negative CCY/SOFR basis swap spreads widened but quickly normalized, indicating limited investor flight to quality [78][82] - The report suggests that diminished demand for USD among offshore investors may be occurring, with US investors showing increased interest in overseas assets [85][96]