Asia EM Equity Strategy Market recommendation and index tar...-110678817

M IdeaAsia EM Equity Strategy | Asia PacificMarket recommendation and index target changes in light of China's easing and other developmentsWe think defense is safer than offense in the current highly complex environment. We are incrementally more concerned on oil price and global growth risk to cyclical markets and sectors. China policy easing is important but valuations have already re-rated substantially. Morgan Stanley Asia (Singapore) Pte.+Jonathan F GarnerEquity Strategist Jonathan.Garner@morganstanley.com +65 6834-8172 Daniel K BlakeEquity Strategist Daniel.Blake@morganstanley.com +65 6834-6597 Morgan Stanley Asia Limited+Laura WangEquity Strategist Laura.Wang@morganstanley.com +852 2848-6853 Morgan Stanley MUFG Securities Co., Ltd.+Sho NakazawaEquity Strategist Sho.Nakazawa@morganstanleymufg.com +81 3 6836-8926 Morgan Stanley Asia (Singapore) Pte.+Kristal JiEquity Strategist Kristal.Ji@morganstanley.com +65 6834-6949 Morgan Stanley Asia Limited+Jason Ng, CFAQuantitative Strategist Jason.Dl.Ng@morganstanley.com +852 2848-8845 Crystal NgEquity Strategist Crystal.Ng@morganstanley.com +852 2239-1468 Chloe LiuEquity Strategist Chloe.Liu1@morganstanley.com +852 2848-5497 Catherine ChenEquity Strategist Catherine.Chen@morganstanley.com +852 3963-4186 Nicola MakQUANTITATIVE STRATEGIST Nicola.HY.Mak@morganstanley.com +852 3963-0368 Morgan Stanley MUFG Securities Co., Ltd.+Ayako TanakaEquity Strategist Ayako.Tanaka@morganstanleymufg.com +81 3 6836-8419 We raise our June 2025 base case index targets for MSCI China to 71 (-3% from spot) and MSCI EM to 1160 (-2%). Our TOPIX target is unchanged at 3,000 (+12% upside from spot). The current environment is characterised by multiple dimensions of risk and opportunity, including the following debates:- The Fed beginning a rate cut cycle with a major 50bps cut in the context of persistently negative global economic surprise data: What does this mean for the earnings cycle and global equities?- China's policy easing cycle: Is it sufficient to deliver an exit from deflation and a turn in the earnings cycle?- Middle East developments: Is there a risk of a sustained spike in oil prices?- Tech cycle and AI spending: Are the recent declines in stock prices temporary or the beginning of a meaningful down-cycle?- Japan's new Prime Minister: Is a meaningful change in the policy framework likely that would alter investor perceptions of reflation and corporate ROE expansion? - The US Presidential election in November: How does this affect US tariff/trade and industrial policy? Which Asia/EM markets are positively or negatively affected? Morgan Stanley does and seeks to do business with companies covered in Morgan Stanley Research. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of Morgan Stanley Research. Investors should consider Morgan Stanley Research as only a single factor in making their investment decisi