Morgan Stanley(US:MS)2025-09-28 14:57Summary of Key Points from the Conference Call Industry Overview - Industry: Asia Pacific Economics - Key Focus: Discussions with US investors regarding the economic outlook for Asia, particularly China, India, and Japan Core Insights 1. Business Cycle Outlook for Asia: - Investors are generally optimistic about growth, particularly equity investors compared to fixed income investors who anticipate a modest slowdown. - There is a strong IT capital expenditure in the US, which is expected to support Asia's exports [6][5][5] 2. China's Macro vs. Market Divergence: - Investors recognize the weakness in China's macroeconomic landscape but expect markets to diverge from macro trends. - The anti-involution policy is seen as insufficient to address deflationary pressures [22][22][5] 3. India's Domestic Demand Recovery: - Investor sentiment is bearish on India due to recent deceleration in corporate revenue and profit growth. - However, a recovery is anticipated from Q4 2025 driven by fiscal and monetary easing measures [26][27][28] 4. Japan's Policy Rate Path: - Most investors expect the Bank of Japan (BoJ) to hike rates sooner rather than later, contrary to the base case which does not foresee rate hikes even in 2026. - The current inflation dynamics are largely influenced by supply factors rather than demand [29][30][32] Additional Important Insights 1. Impact of Tariffs: - The weighted average tariff on imports from Asia has risen to 25%, significantly impacting growth expectations. - The US-Korea trade deal remains unresolved, with auto tariffs still at 27.5% [7][5][5] 2. Korea's Trade Cycle: - Recent data indicates a slowdown in Korea's exports, with daily exports contracting by 10.6% after adjusting for working days, highlighting broad-based weakness [8][8][8] 3. Rate Cuts in Asia: - More rate cuts are expected across Asian economies, particularly in India, Korea, Indonesia, and Taiwan, as growth and inflation pressures persist [16][19][19] 4. China's Deflationary Pressures: - For a sustainable exit from deflation, significant shifts in the growth model are necessary, including reducing excess capacity and boosting domestic consumption [23][24][24] 5. Investor Focus on Micro Themes: - Investors are increasingly interested in micro themes such as emerging frontiers and sectors benefiting from anti-involution policies, rather than macroeconomic recovery [25][25][25] 6. US-India Trade Relations: - Ongoing trade tensions pose risks to India's growth outlook, particularly concerning services exports which constitute a significant portion of GDP [28][28][28] 7. Japan's Corporate Profit Outlook: - The slowdown in global trade is expected to adversely affect corporate profits, especially in the manufacturing sector [34][34][34] This summary encapsulates the key discussions and insights from the conference call, providing a comprehensive overview of the current economic landscape in Asia and the sentiments of investors regarding future growth and risks.