Investment Rating - The report maintains an Overweight (OW) rating for NVIDIA Corporation with a price target of $170.00 for December 2025 [2][10]. Core Insights - NVIDIA reported solid revenues of $44 billion for the April quarter, exceeding both internal and consensus estimates despite approximately $2.5 billion in lost GPU shipments to China due to restrictions [1][15]. - The company anticipates revenues of $45 billion for the July quarter, which is below consensus but better than internal expectations, reflecting strong growth in datacenter revenues driven by AI initiatives [1][15]. - The Blackwell datacenter platform is experiencing strong demand, with production and deployment ramping up effectively, and the next-gen Blackwell Ultra platform is set to launch soon [1][15]. - NVIDIA's gross margins were impacted by inventory write-downs, but guidance for future margins is optimistic, with expectations of 72% for the upcoming quarter [1][15]. Summary by Sections Financial Performance - For the April quarter, NVIDIA's revenue was $44,062 million, a 12% increase quarter-over-quarter, with a gross margin of 61% [16]. - The company generated cash flow from operations of $27.4 billion during the quarter, ending with $53.7 billion in cash and equivalents [18]. Segment Performance - Datacenter revenues grew approximately 10% quarter-over-quarter, while gaming revenues increased by 48% due to improved supply and new product launches [15][17]. - The automotive segment saw a slight decline of 1% quarter-over-quarter, while networking revenues surged by 64% [15][17]. Market Outlook - The report highlights strong demand in the PC gaming and datacenter segments, with expectations for continued growth driven by AI and deep learning applications [9][10]. - The anticipated earnings growth rate for NVIDIA is projected at 30-35% over the next few years, supported by a robust pipeline in automotive and software revenues [10].

Investment Rating - The report provides various investment ratings for Japanese automotive companies, including "Overweight" for Toyota Motor, Suzuki Motor, Yamaha Motor, Isuzu Motors, Denso, Aisin, and Nifco, while "Underweight" is assigned to Nissan Motor and SUBARU [5]. Core Insights - The global auto industry is expected to normalize after overcoming COVID-19 and supply chain issues, with a projected growth rate of approximately 2% CAGR from 2024 [20]. - The report highlights the complexity of the Toyota Group structure, indicating increasing cross-shareholdings among its subsidiaries [7]. - Tariff impacts are noted to be minor in the tire sector, but the competitive environment remains challenging [4]. Coverage Universe & Valuation - Nissan Motor: Underweight, Price: ¥355, Target Price: ¥320, Market Cap: ¥1,318.5 billion, FY24E P/E: NM, ROE: -1.2% [5] - Toyota Motor: Overweight, Price: ¥2,624, Target Price: ¥3,600, Market Cap: ¥41,438.1 billion, FY24E P/E: 6.9, ROE: 13.4% [5] - Mitsubishi Motors: Neutral, Price: ¥432, Target Price: ¥360, Market Cap: ¥631.1 billion, FY24E P/E: 15.4, ROE: 3.7% [5] - Mazda Motor: Neutral, Price: ¥894, Target Price: ¥1,000, Market Cap: ¥564.8 billion, FY24E P/E: 4.5, ROE: 7.3% [5] - Honda Motor: Neutral, Price: ¥1,421, Target Price: ¥1,500, Market Cap: ¥7,500.2 billion, FY24E P/E: 6.4, ROE: 7.5% [5] - Suzuki Motor: Overweight, Price: ¥1,787, Target Price: ¥2,300, Market Cap: ¥3,509.7 billion, FY24E P/E: 8.6, ROE: 14.5% [5] - SUBARU: Underweight, Price: ¥2,625, Target Price: ¥2,500, Market Cap: ¥1,923.9 billion, FY24E P/E: 5.5, ROE: 12.9% [5] - Yamaha Motor: Overweight, Price: ¥1,075, Target Price: ¥1,500, Market Cap: ¥1,103.3 billion, FY24E P/E: 9.7, ROE: 13.3% [5] - Isuzu Motors: Overweight, Price: ¥1,924, Target Price: ¥2,600, Market Cap: ¥1,372.5 billion, FY24E P/E: 9.8, ROE: 9.5% [5] - Denso: Overweight, Price: ¥1,897, Target Price: ¥2,300, Market Cap: ¥5,522.1 billion, FY24E P/E: 13.0, ROE: 8.0% [5] - Aisin: Overweight, Price: ¥1,781, Target Price: ¥2,200, Market Cap: ¥1,440.9 billion, FY24E P/E: 13.4, ROE: 5.2% [5] - Bridgestone: Overweight, Price: ¥6,106, Target Price: ¥6,500, Market Cap: ¥4,357.8 billion, FY24E P/E: 14.7, ROE: 8.0% [5] Earnings Forecast Summary - Toyota's revenue for FY24 is projected at ¥45,095.3 billion, with a YoY growth of 21.4% and a net profit of ¥4,944.9 billion [17]. - Honda's revenue for FY24 is projected at ¥20,428.8 billion, with a YoY growth of 20.8% and a net profit of ¥1,107.2 billion [17]. - Nissan's revenue for FY24 is projected at ¥12,685.7 billion, with a YoY growth of 19.7% and a net profit of ¥426.6 billion [17]. - Suzuki's revenue for FY24 is projected at ¥5,374.3 billion, with a YoY growth of 15.8% and a net profit of ¥267.7 billion [17]. - SUBARU's revenue for FY24 is projected at ¥4,702.9 billion, with a YoY growth of 24.6% and a net profit of ¥385.1 billion [17].

Investment Rating - The report assigns an "Attractive" investment rating to the China Healthcare sector, specifically highlighting the CDMO industry as a key area of interest [6]. Core Insights - The report emphasizes the strong recovery and growth potential of leading Chinese CDMOs, particularly WuXi XDC, which is identified as the top pick due to its favorable risk-reward profile and high earnings visibility [4][9][44]. - Key indicators such as capital expenditure, R&D spending, and backlog are trending positively, exceeding pre-Covid levels, indicating robust demand for CDMO services [4][23][46]. - The report notes that while the propensity to outsource by US biopharmas remains strong, there is a significant trend towards on-shoring, which is reshaping the competitive landscape [5][10][27]. Summary by Sections Capital Expenditure and Manufacturing Capacity - Significant investments in capacity are being made by global and Chinese CDMOs, with utilization levels remaining high at approximately 80% [4][23]. - After a period of reduced investment in 2023 and much of 2024, companies are again increasing capital expenditures, indicating a recovery in demand [4][46]. R&D Spending - R&D spending has surpassed pre-Covid levels, with high outsourcing rates, particularly for complex drug modalities like ADCs [4][24]. - Major biopharmaceutical companies are increasingly relying on outsourcing as they navigate the complexities of drug development [4][24]. Backlog - There has been a substantial year-over-year increase in backlog for leading CDMOs, driven by late-stage and commercial manufacturing contracts, particularly for WuXi Biologics and WuXi AppTec [4][26]. - The report highlights that the backlog accumulation supports revenue growth guidance of over 30% CAGR for WuXi XDC from 2024 to 2028 [4]. Geopolitics and Outsourcing Trends - The report discusses the geopolitical landscape affecting the CDMO industry, noting that while on-shoring is a reality, the demand for outsourcing remains strong among US biopharmas [5][10][27]. - WuXi companies are strategically investing in regions like Singapore and the US to mitigate tariff impacts and enhance their competitive positioning [5][10]. Competitive Positioning - WuXi Biologics, WuXi AppTec, and WuXi XDC are positioned as leaders in the global CDMO market, with significant market share in both small and large molecule segments [16][20]. - The report indicates that the WuXi companies have established a strong track record and quality reputation, which are critical factors for biopharma clients when making outsourcing decisions [29][42].

Investment Rating - The report suggests a "Buy" rating for the Consumer and Internet sectors in China, indicating that these sectors are attractively valued and experiencing a solid upturn in earnings per share (EPS) trends, which have been underpriced by the market [16]. Core Insights - The sentiment at the recent China Summit was optimistic, driven by industrial innovation, supply-side resilience, and emerging AI leadership, suggesting a potential consumption transition in China's economy [2][3]. - China's current consumption accounts for only 40% of GDP, with a high savings rate exceeding 30%, which contributes to trade imbalances and industrial overcapacity [4][5]. - The geopolitical landscape, particularly US-China relations, is pushing for increased consumption in China as a means to address trade imbalances and foster economic equilibrium [5][9]. - There is a strong alignment between geopolitical pressures and China's economic self-interest in boosting domestic consumption, which is seen as crucial for enhancing economic resilience and addressing macroeconomic weaknesses [13]. Summary by Sections Geopolitical Factors - The US-China negotiations are increasingly focused on lifting China's consumption as a key factor for economic balance, with a narrow window for discussions heightening the urgency [5]. - Other countries are also concerned about China's consumption strategy, fearing that continued excess capacity could negatively impact their domestic industries, leading to potential trade barriers [9]. Economic Self-Interest - Increasing domestic consumption is essential for China to improve economic resilience and combat deflation and weak corporate profitability, making it a top policy priority [13]. - The transition from a supply-side growth model to one that emphasizes consumption is necessary for sustainable economic growth, especially as the housing market stabilizes [13]. Investment Implications - The report highlights that if China actively supports consumption, it could lead to a slower pace of debt accumulation, easing deflationary pressures, and improving corporate profitability [16]. - The focus for investors should be on internet companies and leading consumer brands, as these sectors are expected to benefit significantly from policy support and improved market conditions [16].

Investment Rating - The report does not explicitly state an investment rating for the industry [1]. Core Insights - US equities underperformed while TOPIX and DAX posted the highest gains of 0.5% and 0.4% respectively [97] - Performance among equity sectors was mixed, with technology down 2.7% and materials up 0.6% [97] - Credit spreads widened across US and EU investment-grade (IG) and high-yield (HY) indices [97] - Rates sold off across the UST curve, with the UST 2s10s curve steepening by 5 basis points [97] - Major G10 currencies appreciated against the US dollar, with the DXY index ending the week 1.5% lower [97] - Commodity markets showed mixed performance, with gold up 4.1%, copper up 3.7%, and silver up 3.5%, outperforming the Bloomberg Commodity Spot Index (BCOMSP) which rose 1.9% [97] Summary by Sections Market Performance - US equities underperformed while TOPIX and DAX posted gains [97] - Technology sector declined by 2.7% while materials sector increased by 0.6% [97] Credit and Rates - Credit spreads widened across US and EU IG and HY indices [97] - UST curve experienced a sell-off, with a steepening of the UST 2s10s curve by 5 basis points [97] Currency and Commodities - Major G10 currencies appreciated against the US dollar, with the DXY index down 1.5% [97] - Gold, copper, and silver outperformed the BCOMSP, with respective increases of 4.1%, 3.7%, and 3.5% [97]

May 27, 2025 09:00 PM GMT Asia Thematics and Sustainability | Asia Pacific What Investors in China and Japan Are Saying The two biggest markets in Asia are showing strong interest in thematic and sustainability topics. We met with >15 investors in Shanghai and Tokyo over the last two weeks and highlight the key topics from our meetings in this report. Key Takeaways M Idea Morgan Stanley Asia Limited+ Tim Chan, CFA Equity Strategist Tim.Chan@morganstanley.com +852 3963-4568 Morgan Stanley & Co. LLC Stephen C ...

Investment Rating - The report maintains an "Overweight" (OW) rating on US assets, particularly in global equities and core fixed income, while being "Underweight" (UW) in other fixed income and commodities [3][12]. Core Insights - The global economy is in expansion mode despite slowing growth, with a projected global growth rate of 2.5% for 2025 and 1.0% for the US [9][18]. - US assets are expected to outperform their counterparts in the rest of the world (RoW) due to a favorable macro narrative, including slowing economy, receding inflation, and policy easing [10][33]. - The USD is anticipated to weaken further, influenced by converging US rates and growth with peers, alongside rising risk premiums from FX-hedging flows [2][11]. Summary by Sections Macro Overview - The global economy is still expanding, albeit at a slower pace, with significant monetary easing expected [9][18]. - The average effective tariff rate is projected to remain at 13%, impacting inflation and consumption [22]. US Economic Outlook - The US is expected to experience a GDP growth slowdown from 2.5% in 2024 to 1.0% in 2025 and 2026, driven by tariffs and immigration controls [18][22]. - Core PCE inflation is projected to rise to 3.3% in 2025, with inflation expectations potentially becoming more malleable due to prolonged above-target inflation [19][22]. Global Equities - The S&P 500 is forecasted to show the strongest EPS growth, while emerging markets and Japan are expected to face material downgrades [33][36]. - The report suggests that dollar weakness and tax breaks will support a sustained recovery in US earnings [36]. Fixed Income - Core fixed income is rated "Overweight," with expectations of good total returns on duration rallying [3][12]. - US Treasury yields are projected to decline, with 10-year yields expected to reach 4.00% by 4Q25 [37]. Currency Outlook - The report anticipates the DXY to fall by 9% to 91 by mid-2026, driven by converging rates and growth [47]. - Safe-haven currencies like EUR and JPY are expected to benefit from the USD's weakness [42][43]. Commodities - The outlook for commodities is mixed, with lower oil prices expected due to supply-demand imbalances, while gold may rebound if the DXY weakens [57][62]. - Copper is currently tight but faces demand risks as the effects of front-loading metal to the US are realized [59].

Investment Rating - The report assigns an "Overweight" rating for Apple, Inc. (AAPL) with an industry view of "In-Line" [5]. Core Insights - A 25% tariff on iPhone imports is deemed insufficient to incentivize Apple to relocate production to the US due to high costs and long time-to-market considerations [3][8]. - The potential for tariff escalation poses additional concerns for Apple investors, with the possibility of a 50% tariff being discussed [3][8]. - Apple has committed to investing $500 billion in the US over the next four years, which could be leveraged to mitigate tariff threats [10]. Summary by Sections Tariff Implications - President Trump has threatened a 25% import tariff on smartphones, including the iPhone, which may not be legally enforceable [3][8]. - Building new assembly plants in the US would require a minimum of 2+ years and several billion dollars, making it a significant challenge for Apple [8][9]. - A US-produced iPhone would be approximately 35% more expensive than one produced in China or India, far exceeding the 4-6% price increase needed to offset a 25% tariff [8][9]. Financial Projections - The report estimates that a 25% tariff would add about $300 million in incremental tariff costs for Apple, translating to an 11 cent headwind to EPS for FY26 [10]. - Apple's projected EPS for the fiscal years ending in 2024, 2025, 2026, and 2027 are $6.75, $7.02, $7.69, and $8.64 respectively [5][11]. Production Strategy - Apple may consider reshoring some production of smaller volume products to appease the administration, which could help mitigate geopolitical risks [10]. - The report suggests that Apple could announce commitments to produce other products in the US, which would be less symbolic than the iPhone but still beneficial [10].

Investment Rating - The investment rating for Tesla Inc is Overweight, with a price target of $410.00, while the current share price is $341.04 [8]. Core Insights - The report emphasizes the critical role of rare earths, particularly in the production of permanent magnets essential for various applications, including electric vehicles and humanoid robots [2][3]. - China currently dominates the rare earth supply chain, controlling approximately 65% of mining and 88% of refining, which poses significant national security risks for the US [5][36]. - The demand for rare earths is expected to surge due to the anticipated growth in humanoid robots, potentially increasing the demand for critical minerals by up to $800 billion by 2050 [14][18]. Supply and Demand Dynamics - The average humanoid robot is estimated to require around 0.9 kg of rare earth metals, with humanoids projected to significantly increase the demand for neodymium and praseodymium (NdPr) [14][25]. - The report indicates that the introduction of humanoids could lead to a doubling of current magnet demand forecasts by 2050, with humanoids potentially accounting for up to 62% of total magnet demand [23][24]. - The average lead time for new mines to become operational has increased to approximately 17.8 years, complicating the supply situation for critical minerals [12]. National Security and Geopolitical Risks - The report highlights that the US remains heavily reliant on Chinese rare earths, with no immediate alternatives available, raising concerns about supply chain vulnerabilities [6][12]. - Recent geopolitical tensions have led to China implementing export controls on rare earths, further complicating the supply landscape for Western countries [39][40]. - The report suggests that if Western governments push for non-Chinese magnets in critical applications, significant shortages of these materials could occur [42]. Future Projections - By 2050, the demand for NdPr could see significant deficits, with projections indicating that the market may shift from surplus to deficits shortly after 2035 due to humanoid demand [31][34]. - The report anticipates that additional supply will be necessary, with potential sources including hard rock mining and by-product processing, particularly in countries like Brazil, India, and Australia [46][47].

Investment Rating - The report does not explicitly provide an investment rating for the industry Core Insights - Asia's current account surpluses are expected to narrow due to a slowdown in global trade and increased purchases from the US, but this does not indicate a true rebalancing of the economy [4][6][39] - Asia's international investment position has reached US$45 trillion, with potential for increased hedging but limited portfolio rebalancing due to a lack of alternatives [4][8][50] Summary by Sections Current Account Balances - Asia's current account surplus is projected to narrow to US$0.9 trillion (3.1% of GDP) in 2025 from US$1.0 trillion (3.6% of GDP) in 2024 [37] - The narrowing is attributed to a slowdown in exports and increased purchases from the US, similar to trends observed in 2018-19 [6][38] - Despite the narrowing, the report emphasizes that this should not be viewed as a sustained rebalancing, as Asia's growth model remains focused on manufacturing exports and high savings rates [7][39] Investment Position - Asia's gross international investment position (IIP) has increased to US$45 trillion, with a net IIP of US$12 trillion as of 2024 [50][51] - Asia's holdings of US portfolio investments have risen by US$2.8 trillion to US$8.6 trillion, increasing the US's share of Asia's portfolio assets from 37% in 2018 to 41% currently [67][74] - The report notes that Asia's investment ratios are high, and policymakers are likely to maintain these levels to counteract demographic challenges [41][39] Economic Model and Savings - The report highlights that Asia's growth model is heavily reliant on manufacturing exports, with investment to GDP ratios typically above 30% during industrialization phases [26][32] - High savings rates in Asia, particularly in China (43%) and other current account surplus economies (32%), are driven by both mandatory savings systems and a lack of social security support [32][34] - The report suggests that without significant policy shifts, a sustained increase in consumption to GDP ratios is unlikely [39][41]