Summary of the Conference Call on US-China Relations and Market Impact Industry and Company Involved - **Industry**: US-China trade relations, technology, critical materials, and export controls - **Company**: Morgan Stanley Core Points and Arguments Current State of US-China Relations - A one-year truce was established on October 30, 2025, with the US reducing fentanyl-related tariffs by 10 percentage points and China resuming soybean purchases from the US [12][32] - The truce is fragile, with ongoing competitive confrontation expected to continue, leading to rolling negotiations and episodic flare-ups [2][14] Economic Scenarios - **Base Case**: A one-year truce is marginally positive for growth, with a potential 1 percentage point increase in China's export growth and a 10 basis point boost to real GDP growth due to tariff cuts [3][50] - **Bear Case**: A premature breakdown of the truce could lead to renewed tariffs and prolonged deflation, with MSCI China potentially falling below 12x forward P/E [4][24] - **Bull Case**: A framework deal could lead to a more favorable external environment, with MSCI China rising above 14x forward P/E [5][29] Market Implications - Reduced policy uncertainty is expected to stabilize MSCI China at 13-14x forward P/E, aligning with broader emerging market peers [19][50] - High-beta growth sectors, particularly AI and export-oriented industries, are likely to benefit from improved tariff visibility and a more predictable global demand outlook [30][21] Export Controls and Strategic Materials - China has established a dominant position in critical materials, particularly rare earths and lithium-ion batteries, which it may leverage strategically against US tech restrictions [15][36] - The earlier export controls on rare earths remain in effect, allowing China to retain discretion over the timing and scope of these controls [16][34] Geopolitical Dynamics - The US and China are expected to maintain strategic interdependence, with both sides preferring the current equilibrium over a complete decoupling [33][64] - The ongoing tech rivalry will likely continue to shape market dynamics, with both countries using export controls as tools for geopolitical leverage [31][37] Sector-Specific Insights - The AI localization theme remains robust, supported by domestic capex and R&D investment [21] - Sectors with high US revenue exposure, such as pharmaceuticals and tech hardware, are well-positioned to capture rebounds due to lower average tariff rates [22] Risks and Considerations - A breakdown of the truce could exacerbate supply-demand imbalances and deepen the debt-deflation downturn in China [23][52] - Investors may rotate towards defensive sectors in a volatile macro environment, focusing on yield-oriented plays [25] Conclusion - The one-year truce offers temporary relief but does not resolve the structural tech rivalry between the US and China. The situation remains fluid, with potential for both growth and risks in the coming months [31][64]

Company Overview - ASML Holding NV shares increased approximately 2% intra-day following an upgrade from Mizuho to Outperform from Neutral, with a new price target set at EUR 930 [1] - Mizuho anticipates ASML's earnings per share to grow by 6% year-on-year in 2026 and by 21% in 2027, driven by strong wafer fab equipment spending from TSMC, increased DRAM investments, stable demand from Intel, and consistent contributions from China [1] Industry Insights - Mizuho forecasts stronger-than-expected demand for extreme ultraviolet (EUV) lithography tools, influenced by Samsung's technology migration and capacity expansion, as well as Intel's 18A CPU production and the upcoming 14A R&D capacity rollout in late 2026 [2] - Intel's potential foundry partnerships with Apple and Nvidia are also identified as significant growth drivers for the industry [2] - The wafer fab equipment market in China is projected to grow by 13% in 2026, supported by DRAM expansion, logic advancements, and AI localization trends, with ASML's business in China expected to rise by 4% that year [3]