Institutional Research

Morgan Stanley finds that selective refinancing has reduced the immediate software maturity wall and supported loan prices. It remains cautious on weaker credits and CLO exposure because the larger, lower-quality 2028 cohort will face higher coupons, tighter documentation and continued AI-related business-model uncertainty.

• Software loans have rallied 3 points from June lows but remain below the broader market.
• Pre-2028 software maturities fell to about $50 billion from about $75 billion at year-end 2025.
• Morgan Stanley tracked seven refinancing or amend-to-extend deals and five defaults since April.
• The remaining 2028 maturity cohort totals $48 billion, with 74% rated B- or below.
• The report maintains aggregate default forecasts of 5.5% for BSL and 8% for private credit.
• Morgan Stanley remains up in quality and cautious on CLO managers with high software exposure.

The report closes its long European diesel timespread recommendation after diesel prices incorporated substantial disruption risk and recommends long EBOB Jun27 gasoline instead. It argues that diesel economics are diverting refinery output away from gasoline just as gasoline inventories and exports are weakening.

• European Jun27 gasoline prices had risen 37% since March, versus a 64% rise for diesel.
• The US diesel-gasoline spread exceeded $60/bbl, versus below $3/bbl a year earlier, encouraging refiners to favor diesel output.
• US diesel yields exceeded seasonal norms by 0.6 percentage points in March-August, while gasoline yields undershot by 1.3 percentage points.
• Global gasoline exports were down 24% year-on-year, while OECD gasoline refinery output fell nearly 2% year-on-year in Q2.
• The report views outright gasoline exposure as a better geopolitical hedge than refining margins.

The report argues that reforms to listings, market connectivity, offshore RMB liquidity, bond-market infrastructure, derivatives and commodities should broaden HKEX’s products and liquidity. Goldman Sachs maintains Buy with a HK$532 12-month target price.

• The plan aims to strengthen Hong Kong as an international financial centre across offshore RMB, equity and bond markets, commodities, fintech and risk prevention.
• Goldman Sachs views expanding FIC offerings as HKEX’s next growth engine, supported by RMB internationalisation.
• Proposed reforms span listing rules, T+1 settlement preparation, RMB counters, ETF access, bond-market infrastructure, derivatives and gold trading.
• The HK$532 target is based on a three-stage DDM and implies 34x 2027E P/E.
• Explicit downside risks are onshore competition, lower cash-market velocity, onshore fee pressure and sustained China deflation.

Following Fujitsu’s IR Day, Goldman Sachs maintained Buy and a ¥4,590 target price. The report expects CPU/AI-server profits to emerge from FY3/28 while AI-enabled development and pricing reform support ongoing service-margin improvement.

• MONAKA CPU and server sales are targeted to begin contributing profits in FY3/28.
• Fujitsu aims to lift value-based pricing from 20% in FY3/26 to 80% in FY3/36.
• AI-driven development is expected to support profitability beyond the industry average.
• The report flags FY3/27 pressure from upfront investment and elevated memory prices.

The report argues that Asia's expansion should continue despite rising rates and energy costs because real rates remain non-restrictive, private-sector leverage is low, and investment drivers extend beyond AI. A sustained oil price of US$130-150/bbl for six months or more is the principal downside scenario.

• Asia ex-China real policy rates have risen 50bp from their February 2026 trough but remain 160bp below the February 2025 peak.
• Corporate debt-to-GDP is 73% in Asia ex China, below pre-Covid levels.
• AI and AI-related digital infrastructure account for 11% of Asia's incremental capex through 2030 in Morgan Stanley's forecasts.
• Oil near US$110/bbl is viewed as manageable with fiscal cushioning; US$130-150/bbl sustained for at least six months would materially slow growth.
• Asia's 2026 oil burden is estimated at 4.7% of GDP under Morgan Stanley's 4Q26 oil and gas assumptions, near its 20-year average of 4.7%.

JPMorgan argues that continued gold ETF inflows have created a vulnerable concentration of recent purchases at high prices just as a more hawkish Fed could add pressure. It remains cautious near term but sees a decline to $4,000/oz or below as a potential medium-term buying opportunity, with gold forecast to recover to $5,000/oz next year.

• Global gold ETFs have added nearly 180 tonnes, or more than 4% of holdings, since mid-July.
• A Bloomberg-based analysis estimates that more than 90 tonnes of recent ETF additions were created at or above $4,350/oz.
• JPMorgan expects a 25bp Fed hike at the current meeting and another 25bp hike in December.
• A hawkish Fed outcome could trigger ETF liquidation and another defense of $4,000/oz.
• JPMorgan's medium-term base case is for the Fed to under-deliver on hikes versus market expectations, supporting a recovery to $5,000/oz next year.

Goldman Sachs sees early evidence that Mercedes and BMW launches are gaining traction as China moves to curb destructive competition. Nevertheless, consolidating and better-capitalised local manufacturers continue to challenge European premium brands' market positions.

• China's NEV plan targets 70% of passenger-car sales by 2030 and promotes capacity discipline and consolidation.
• Mercedes began GLC sales at around 1,500 units per month; the locally produced GLE is also ramping.
• BMW iX3 pre-orders are reported as positive, including interest from Li Auto owners, but conversion depends on test drives and L2++ credibility.
• Mercedes, BMW and Porsche all recorded substantial year-on-year declines in implied China retail revenue in August.
• Goldman Sachs retains Buy ratings with 12-month targets of €67 for Mercedes, €82 for BMW and €53 for Porsche.

Conference discussions reinforced Morgan Stanley's view that commercial manufacturing contracts can accelerate in 2027. The firm retains its 20% three-year revenue CAGR outlook and Overweight rating with a HK$57 target price.

• Management ranks manufacturing growth drivers as follow-the-molecule, drug products, biosimilars, then win-the-molecule.
• The 20% three-year revenue CAGR target is unchanged, although growth contributions have shifted toward development and manufacturing.
• Customer launch inventory timing around end-2026 or early-2027 could create earnings upside.
• The report cites 34 and 30 PPQs scheduled by regulators for 2026 and 2027, respectively.
• WuXi had 17 biosimilar projects in its portfolio as of mid-year.

The report finds that US Treasury futures trade as a blend of current cheapest-to-deliver sensitivity and probability-weighted delivery risk. For USZ6, a 20–30bp sell-off could trigger a CTD switch and lift futures PV01 by 46%, supporting a long 5% May45s versus short USZ6 position.

• A 56% current-CTD and 44% probability-weighted blend produced the lowest prediction error for realized US futures moves over the past two years.
• Morgan Stanley expects a CTD switch from the 5% May45s to the 1.375% Aug50s if long-end yields continue to sell off.
• The projected CTD switch could increase USZ6 futures PV01 by 46% over a roughly 20–30bp sell-off.
• The recommended conversion-factor-weighted trade is long 5% May45s versus short USZ6 at a 17.14-tick gross basis and 8.84-tick net basis using a 4.17% term repo rate.

This Fall 2026 sector update reviews large-cap and SMID internet stocks across AI infrastructure, advertising, commerce, travel, gaming and digital apps. The report favors selected AI-enabled platforms and identifies Alphabet, Spotify, Shopify and Take-Two as key ideas, while stressing the cost and competitive consequences of the AI buildout.

• Hyperscaler capex is projected to rise 70% to more than $1.5T in 2027, intensifying free-cash-flow pressure.
• J.P. Morgan models roughly $1.1T of hyperscaler debt raises from 2027E to 2029E.
• AI returns are becoming more visible in cloud, advertising and enterprise products.
• Only about one-third of the firm's internet coverage stocks were up year to date, with smaller-cap performance notably weaker.
• The report identifies Alphabet, Spotify, Shopify and Take-Two as prominent favorable ideas.