Investment Rating - The report indicates a potential growth estimate for Korea below 2.0% from 2026 onwards, highlighting the urgency for structural reforms [5][26]. Core Insights - Korea is facing significant demographic challenges, with a fertility rate that fell to 0.75 in 2024, the lowest in the world, and a projected halving of the workforce by 2065 [7][9]. - The new government's commitment to structural reform is emphasized, with a focus on long-term solutions rather than short-term fixes [7][26]. - The pension reform legislated for the first time in 18 years aims to improve the financial sustainability of the pension fund in response to a rapidly aging population [26][32]. Summary by Sections Demographic Trends - Korea's total population began to decline in 2025 due to the fastest dropping fertility rate globally [9]. - The fertility rate has shown a slight rebound in 2024, providing a window of opportunity to support critical age groups [15][16]. Economic Reforms - The new government under President JM Lee is prioritizing economic recovery and addressing low birth rates as key agenda items [59]. - Labor market reforms are necessary to address dualism, gender wage gaps, and strict working hour regulations [71]. Pension and Consumption - The income replacement ratio is forecasted to fall to 40% by 2028, which is below the OECD recommended level [32][34]. - As aging accelerates, the number of pension recipients is expected to outpace contributors by 2047, impacting household consumption [44][45]. Capital Market Reforms - The government plans to mitigate the "Korea discount" through capital market and governance reforms, including changes to corporate transactional rules [72][74]. - The Commercial Code amendment bill is on a fast track for approval, aiming to enhance corporate governance and shareholder returns [78][79].

Investment Rating - The report assigns an "Overweight" (OW) rating to HK Exchanges & Clearing (0388.HK) with a new price target of HK$500, reflecting a 24% upside potential from the current price of HK$402.40 [6][31]. Core Insights - The report highlights increased confidence in the financial system cycle bottom, which is expected to support trading volume and market sentiment in Hong Kong [9][44]. - Strong year-to-date (YTD) performance is noted, with average daily trading value (ADV) reaching HK$240 billion as of June 6, 2025, an 82% increase from HK$132 billion in 2024 [2][9]. - The report anticipates a robust IPO recovery, with funds raised reaching HK$78 billion in the first five months of 2025, up over 700% year-on-year [15][17]. Summary by Sections Financial Performance - The report raises ADV assumptions to HK$220 billion for 2025 and HK$240 billion for 2026, reflecting a more favorable market environment and increased IPO activity [4][26]. - Earnings forecasts have been adjusted upward, with EPS estimates increasing by 9.4% for 2025 and 10.6% for 2026 [27][30]. Market Dynamics - The financial system is believed to be in a properly regulated development mode, reducing market volatility and supporting capital market activity [3][10]. - The report identifies key drivers for trading volume, including a shift to an innovation-driven development model in China and easing trade tensions, which are expected to enhance market sentiment [11][14]. IPO Activity - A solid IPO pipeline is anticipated, with 138 deals in process as of May 30, 2025, and expectations for IPO volume to rise to HK$180 billion in 2025 and HK$310 billion in 2026 [15][19]. - The loosening of IPO criteria by the China Securities Regulatory Commission (CSRC) is expected to further stimulate market activity [15][44]. Valuation and Price Target - The new price target of HK$500 is derived from applying a P/E multiple of 37.4x to the 2026 EPS estimate of HK$13.38, reflecting a bullish outlook on market conditions [31][38]. - The report outlines different valuation scenarios, with the base case target increasing to HK$468 and the bull case target rising to HK$630 [32][33].

Investment Ratings - The report assigns an Overweight (OW) rating to China Resources Land, Sony Group, and Eternal [1][2][17]. Core Insights - China Resources Land is viewed as a transformation story with strong recurring profits justifying a re-rating, leading to its designation as a Top Pick [1]. - Sony Group's Game & Network Services segment is expected to continue driving growth, with a recovery anticipated in television programming production, prompting a price target increase and reiteration as a Top Pick [2]. - Eternal is recognized for its market leadership, superior cost structure, and stronger balance sheet compared to peers, with a favorable risk-reward profile, reaffirming its status as a Top Pick [2]. Summary by Sections Performance Summary - As of June 3, 2025, there are 1,353 ideas with a cumulative outperformance of 6,831 basis points against local benchmarks [3]. - The average holding period total return is 3.0%, while the average 12-month total return is -1.9% [3]. - The hit ratio for positive returns stands at 53% [3]. Market Insights - The report highlights that Hong Kong and China account for the most ideas in the region, followed by Japan [25]. - India generated the best holding period relative return at 5.1%, while Korea had the lowest at 1.9% [25]. Valuation Methodology - For China Resources Land, the estimated NAV is HK$55.43 per share, with a 30% discount applied based on a developers' scorecard [37]. - Sony Group's price target is based on a fair EV/EBITDA of 11.6x on FY3/27 earnings estimates [38]. - Eternal's valuation is based on EV/adjusted EBITDA, with a weighted approach reflecting expectations of continued positive surprises [39].

Investment Rating - The report indicates a preference for offshore markets (Hong Kong + ADR) over A-shares due to better single stock opportunities and sector composition [10][11]. Core Insights - Investor sentiment towards China has improved, with a higher willingness to allocate to Chinese equities, particularly in Tech and New Consumption sectors [2][3]. - The A-share market has underperformed compared to the Hong Kong market, with the CSI 300 down 1.5% YTD as of June 6, 2025, while the Hang Seng and MSCI China indices are up 19% and 16% respectively [8][10]. - The report highlights that China's investability has improved, with new technologies and business models attracting significant investor interest [4][5]. Summary by Sections Investor Sentiment - Investors are increasingly interested in adding exposure to Chinese equities, acknowledging that their current exposure is low, with a 2.4 percentage point underweight in Chinese equities compared to the MSCI EM benchmark [3]. Market Performance - The divergence in performance between A-shares and offshore markets is attributed to several factors, including the concentration of high-quality companies in the MSCI China index and muted liquidity support for the A-share market [10][11]. Sector Composition - The MSCI China index has a higher concentration of high-ROE companies in sectors like Internet, financials, and IT, while the A-share market is more exposed to sectors constrained by macro conditions [10]. Technological Advancements - China's advancements in technology, particularly in AI and electric vehicles, have shifted investor perceptions, leading to a renewed interest in the potential of Chinese tech companies [5][4]. Economic Outlook - The report anticipates a persistent deflationary environment in China through 2025 and 2026, with limited stimulus expected from Beijing [11][12].

June 6, 2025 05:03 AM GMT Broadcom Inc. | North America Strong AI networking drives in line results but higher CY26 Unchanged In-line Largely unchanged Impact to our thesis Financial results versus consensus Direction of next 12-month consensus EPS Qtr and outlook was in line, as strong AI was offset by slightly weaker legacy semis. But visibility to strong inference investment drove positive commentary on CY26 AI prospects. Stay OW. Key Takeaways What's Changed Broadcom Inc. (AVGO.O) From To Price Target $ ...

May 18, 2025 06:00 AM GMT Sunday Start | What's Next in Global Macro M Global Idea The Détente – What It Does and Doesn't Mean Following Monday's announcement of a 90-day pause on reciprocal tariffs between the US and China, the response in risk markets has been resoundingly positive through the first four trading days. The S&P 500 is up 4.5% from last Friday's close, and year-to-date returns are back in the black after Liberation Day drove steep declines in April. Credit markets have also rallied notably, ...

Investment Rating - The report recommends an overweight (OW) position in emerging market (EM) foreign exchange (FX), an underweight (UW) in EM sovereign credit, and a market weight (MW) in EM local rates and corporates [5][14][25]. Core Insights - The US policy uncertainty continues to drive the EM outlook in the second half of 2025, with EM currencies expected to perform well in a slower growth, no-recession scenario [5][14]. - The projected global GDP drag from higher tariffs has been reduced following US-China détente, but remains significant, with global growth expected to slow to 1.3% annualized in H2 from 2.4% in H1 [29][30]. - EM monetary easing is ongoing despite a hold by the Federal Reserve, supported by domestic conditions and looser financial stability constraints [5][38]. Summary by Sections Executive Summary - The impact of US trade policy is expected to be more detrimental to the US than to EM, allowing EM local markets to continue performing well [14]. - The report suggests a neutral stance on EM fixed income assets, adjusting previous expectations of increased volatility and risk premia [14][22]. EM Local Markets Strategy - EM FX is positioned as OW, with a preference for currencies from EM Asia and Central and Eastern Europe (CEE) [5][25]. - Local bonds are rated MW, with a focus on short-end receivers in specific countries like Israel and South Korea [5][25]. EM Sovereign Credit Strategy - The report maintains an UW stance on the EMBIGD index due to asymmetric spread outcomes, favoring specific countries like Cote D'Ivoire and Romania while remaining cautious on Brazil and Serbia [5][25]. EM Corporate Strategy - The report holds a MW rating for EM corporates, noting steady fundamentals and technicals, but highlights historically low CEMBI spreads at 230 basis points [5][25].

Investment Rating - The report maintains an "Overweight" rating for Kingsoft Cloud with a target price of $18.50 for KC US and HKD 10.00 for 3896 HK [1][2][16] Core Insights - Kingsoft Cloud's stock price has increased by 140% since the release of its Q3 2024 results, outperforming the Chinese internet index fund which rose by 8% during the same period [1][12] - The company's strategic shift towards artificial intelligence and its integration within the Xiaomi and Kingsoft Group ecosystems are yielding positive financial results [1][12] - The growth prospects for Kingsoft Cloud's AI revenue are considered more certain compared to many other AI stocks due to its unique relationships and increasing demand for GPU computing power [1][12] - The introduction of third-party computing providers is expected to negatively impact Kingsoft Cloud's profit margins due to the complexities in supply chain management [1][12] Summary by Sections Investment Thesis - Kingsoft Cloud's AI revenue has shown significant growth, with total AI revenue rising from RMB 360 million in Q3 2024 to RMB 474 million in Q4 2024 (approximately 500% year-on-year) and RMB 530 million in Q1 2025 (228% year-on-year) [3][12] - The company has achieved three consecutive quarters of triple-digit year-on-year growth in AI revenue, which has improved overall profitability, with adjusted EBITDA margins increasing from 2% in Q1 2024 to 16% in Q1 2025 [3][12] Financial Projections - Revenue forecasts for 2025 have been raised to RMB 9,355 million, reflecting a 17% increase from previous estimates [4][16] - Adjusted net loss for 2025 is projected to be RMB 874 million, revised from RMB 602 million due to the new computing procurement model [4][12] - The target price is based on a 4x EV/Sales multiple for 2025, positioned between the average multiples of U.S. single-business cloud service providers (5.9x) and small-cap SaaS stocks (3.8x) [8][12] Valuation - The target price for Kingsoft Cloud is set at $18.50 based on a 4x EV/Sales multiple for 2025, reflecting a positive adjustment in valuation due to the company's narrative shift [1][8][12] - The report indicates that Kingsoft Cloud's valuation should be adjusted upwards due to the positive changes in the company's narrative and financial performance [1][12]

Investment Rating - The report maintains an "Attractive" industry view for the Property & Casualty (P&C) sector in North America [5] Core Insights - The impact of tariffs is expected to introduce more volatility in loss reserving, particularly affecting property lines of business [1][2] - Companies with significant exposure to property reserves, such as Allstate, Progressive, Hanover, and Travelers, are likely to experience greater reserve fluctuations due to tariff and inflation pressures [2][23] - The overall P&C industry reserves have been growing above 5% since 2022, with expectations of less favorable reserve releases in the future due to increased uncertainty from tariffs and inflation [11][14] Summary by Relevant Sections Loss Reserving Analysis - The report indicates that the current macroeconomic environment, characterized by tariff disputes and inflation fears, is likely to lead to increased fluctuations in overall P&C reserving estimates [7][11] - Historical data shows that initial reserve estimates have faced challenges during periods of economic uncertainty, with the need for reserve strengthening anticipated [7][11] Homeowners Insurance - Claim severity trends for homeowners insurance may increase due to tariff impacts, leading to higher initial loss picks for future accident years [10][30] - The report does not expect significant adverse reserve development for homeowners insurance due to its short-tailed nature, although overall IBNR reserve levels are expected to rise [10][30] Auto Physical Damage - Auto Physical Damage reserves are expected to develop favorably, supported by higher rates and improved profitability, despite potential tariff impacts on repair costs [41][42] - The report notes that while initial loss picks may spike due to tariffs, the overall impact is viewed as manageable [41][42] Commercial Multi-Peril - The report highlights that Commercial Multi-Peril (CMP) reserve development may see a wider range of outcomes as the market transitions, with increased conservatism in loss picks due to social inflation [12][51] - Historical trends indicate that CMP reserves have been affected by hard and soft market cycles, complicating future reserving forecasts [49][52] Overall Industry Trends - The P&C industry is expected to face elevated headwinds for several years, particularly as personal auto enters a more competitive environment and inflation pressures resurface [11][12] - The report emphasizes that companies relying on favorable property reserves to offset adverse casualty reserves will be more vulnerable to the impacts of tariffs and inflation [23][24]

| Hildy Ling | | | --- | --- | | Equity Analyst | | | Hildy.Ling@morganstanley.com | +852 2239-7834 | | Cindy Gao | | June 5, 2025 04:06 AM GMT M Update China Home Appliances and Furnishing | Asia Pacific Our Take on the Suspension of Trade-in Subsidy in Certain Regions Key Takeaways Exhibit 1: Home appliance trade-in sales progress | | | | | | Central | | | Average | | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | | No. of | No. of appliances | | government | % subsidy of | Average price | spen ...