Asian Tech Stocks To Sink

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Asian Tech Stocks To Sink

Morgan Stanley: Asian Tech Stocks To Sink By 20%

According to analysts at Morgan Stanley, there's a high probability that Asian tech stocks will sink by 20%. Why? They have cited several reasons like high valuations, trade risks, and no earnings upside.

If the Trump administration puts tariffs on the computer chips, it could cause a downside of almost 20%. An increase in the trade tension could also lead to major downside in the Asian tech sector.

Tech Sector Has High Eps

At the same time, Morgan Stanley also added that the estimates for the earnings are also way too high. So, when the earnings disappoint, they will also be bearish for Asian tech stocks.

In addition, the risk-reward for the tech sector in the near term is also very poor. Amidst this, the analyst talked about lower hedge sector exposure and the tech sector exposure.

One major reason why global investors are so interested in the Asian tech sectors is the Artificial intelligence. That's why, the chip stocks in the region are almost up by 65% since the start of 2023.

This enthusiasm has also led to higher valuations, but this has not been followed by any big improvements in the EPS estimates.

Meanwhile, the Trump administration remains committed to putting tariffs on foreign chips. If we look back at 2018, the tech sector took a hit due to geopolitical tensions, and the same could happen now.

Morgan Stanley added that the equity market does show some good spots despite the headwinds. They believe that the domestic Chinese stocks and the internet-based stocks from China will perform better in 2025.

Some big companies that could perform well despite the headwinds are Hua Hong Semiconductor Ltd., Semiconductor Manufacturing International Corp, and Naura Technology Group Co.

These stocks could benefit if the trade tensions rise as they have a high exposure in the domestic market only. In fact, trade war could fuel the sales of these companies, leading to higher profits.

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