亚洲新兴市场股票策略 - 大幅估值重估或难持续-Asia EM Equity Strategy Major valuation re-rating may not be sustainable

Summary of Key Points from the Conference Call Industry Overview - The Asia/EM equity markets are currently trading close to the bull case targets set for June 2026, primarily due to multiple expansions, which may not be sustainable without a significant reacceleration in global growth [8][10][19] - Valuations in Asia/EM are now 1.0-1.8 standard deviations above 10-year averages, indicating potential overvaluation [10][19] Core Insights - Earnings per share (EPS) growth is crucial for sustaining current valuations; without it, the market may face corrections [8][10] - China’s economic reflation is progressing slowly, while India is expected to see a rebound in growth rates [8][19] - The US dollar is anticipated to weaken further, which could benefit emerging markets [8][40] - The Bank of Japan (BOJ) may still consider rate hikes, while the Federal Reserve (Fed) is expected to cut rates significantly [8][19] Market Preferences - Overweight (OW) positions are recommended in Japan, Singapore, India, UAE, and Brazil, while underweight (UW) positions are suggested for Indonesia, Saudi Arabia, and Taiwan [8][19] - Preference for local currency earners, particularly in Financials, Domestic E-commerce/Consumer, and Industrials (including Defense) sectors [8][19] - Underweight positions in Energy and Materials (excluding Gold), with a selective approach in Information Technology [8][19] Earnings and Valuation Targets - Current and target prices for major indices as of September 30, 2025: - TOPIX: Current 3,138, Target 2,900, Fwd P/E 13.8x [17][19] - MSCI EM: Current 1,346, Target 1,200, Fwd P/E 12.5x [17][19] - MSCI China: Current 89, Target 78, Fwd P/E 11.2x [17][19] - CSI300: Current 4,641, Target 4,000, Fwd P/E 12.9x [17][19] Global Economic Outlook - Morgan Stanley continues to expect a global economic slowdown, which may impact equity markets [21][40] - There has been a surge in interest in emerging markets (EM), with inflows observed in 8 out of the last 10 weeks [44][47] Company Focus List - Notable companies included in the Morgan Stanley Asia Pacific ex Japan Focus List: - Bajaj Finance (India, Financials) with a market cap of $69.4 billion and a target price indicating a 16% upside [50] - Delta Electronics (Taiwan, Information Technology) with a market cap of $72.8 billion and a target price indicating a 31% upside [50] - Tencent Holdings (China, Communication Services) with a market cap of $787.5 billion and a target price indicating a 6.1% upside [50] Additional Insights - The focus list has outperformed the MSCI Asia Pacific ex Japan Index since inception, with a total return of 548.5% compared to the index's 318.8% [50] - Analysts express caution regarding the sustainability of current valuations without corresponding EPS growth [8][10][19]