Morgan Stanley has released a research report stating that Asia-Pacific equities continue to benefit from the index's tilt towards computing, commodities, and capital goods. The surge in artificial intelligence capital expenditure is driving earnings growth for AI enablers. However, the firm also observes that broader capital expenditure programs encompassing defense and economic security are creating opportunities in industrials and commodities. The report notes that Asia, with its upstream advantages, is well-positioned to capture the benefits from the global AI capex surge, as well as the still-accumulating upward trend in public spending on energy security and defense. Analyzing by economic risk exposure groups, the firm finds that over 50% of the weight in the Asia/Emerging Markets index comes from computing (semiconductors/hardware), commodities, capital goods, and real assets. Earnings growth in the computing segment remains strong, but valuations and positioning have risen accordingly. The firm finds cyclical sectors attractive and, differing from peers, maintains an "Overweight" stance on the commodities sector, which also benefits from the capex supercycle and has more valuation support compared to historical levels and other sectors. Meanwhile, the capital goods sector has a robust long-term outlook, but the firm notes its median valuation is similar to the computing sector while its three-year growth expectations are lower. Strategically, the firm remains "Overweight" on the industrials sector but will continue working with its primary industry teams to screen for potential opportunities. Morgan Stanley's latest list of Asia-Pacific thematic focus stocks is as follows: Taiwan Semiconductor Manufacturing (2330.TW), Samsung Electronics (005930.KS), TENCENT (00700), Contemporary Amperex Technology Co.,Ltd. (300750.SZ), Delta Electronics (2308.TW), AIA (01299), Mitsubishi Heavy Industries (7011.JP), Naura Technology Group Co.,Ltd. (002371.SZ), India's Larsen & Toubro Ltd, Doosan Heavy Industries & Construction (034020.KS), WUXI APPTEC (02359), Hanwha Aerospace (012450.KS), Fanuc (6954.JP), Hyundai Electric & Energy Systems (267260.KS), Shenzhen Inovance Technology Co.,Ltd. (300124.SZ), Taiwan's Wiwynn (6669.TW), Thailand's Gulf Energy Development PCL, Singapore's ST Engineering, Sieyuan Electric Co.,Ltd. (002028.SZ), Furukawa Electric (5801.JP), Taisei Corporation (1801.JP), Australia's Lynas Rare Earths, Sojitz (2768.JP), GS Yuasa (6674.JP), Australia's GemLife Communities.
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