Zhi Tong Cai Jing·2025-09-17 07:10Core Viewpoint - Morgan Stanley maintains a cautious stance on the fundamentals of the mainland software industry, anticipating a slowdown in GDP growth and ongoing deflationary pressures, with low confidence in IT investment from enterprises [1] Group 1: Economic Outlook - The expectation is that GDP growth in mainland China will slow down, and deflationary pressures remain a concern [1] - It is believed that a recovery in IT investment confidence will take 1 to 2 years after deflation ends [1] Group 2: Demand and Supply Dynamics - Any new technology trends driven by supply-side factors will only lead to a redistribution of existing budgets in the market until there is a substantial demand turnaround [1] Group 3: Funding and Market Conditions - The software sector is expected to follow overall market liquidity in a low-interest-rate environment, exhibiting higher elasticity (Beta) due to low allocation by active funds [1] Group 4: Investment Themes - Themes such as AI applications, technology localization, and stablecoins may significantly impact stock prices, but no themes have been identified that can truly reverse the industry's fundamentals at this time [1] Group 5: Stock Recommendations - The firm strongly recommends H-shares over A-shares, with the top pick being Beisen Holdings (09669) with a target price of HKD 10.3 and a rating of "Overweight" due to expected accelerated revenue growth [1] - Other recommended stocks include Kingdee International (00268) with a target price of HKD 14.2, China Software International (00354) with a revised target price of HKD 6.6 (previously HKD 5.4), and Kingsoft (03888) with a target price of HKD 38, all rated "In Line with Market" [1]