摩根士丹利-亚洲经济学：迈向产业超级周期-Headed Towards an Industrial Super-Cycle-20260427

Morganstanley

April27,202607:46PMGMT

RESEARCHAslAPAclFlclNslGHT

AsiaEconomics

HeadedTowardsanIndustrialSuper-Cycle

Asiaisenteringanindustrialsuper-cycle–thebestsincethe

mid-2000s,supportedbyasustainedriseincapex.Geopoliticaltensionsareanear-termheadwindbutarecatalysingmedium-termenergyanddefensespending.If/whentensionsease,weseeaquickresurgenceintheindustrialcycleupswing.

KeyTakeaways

Asia’sindustrialcyclewasalreadyinflectingtoahighsince2017-18priortotheonsetofgeopoliticaltensions.

Whilegeopoliticaltensionsmayhavedentedthemomentuminthenearterm,wethinktheyalsoactasamedium-termcatalyst.

Reasonswhywearebullishontheindustrialcycle–AIandAI-relatedinfrastructure,energytransition,defence,andariseinindustrialcapex.

Asiaistheproductionpowerhouse–sowhenAsia’scapexrisesandglobalcapexdoestoo,Asiastandstoenjoyadoublebenefit.

Weexpecta7%CAGRinAsia’scapexthrough2030,~3xthepaceofthepast

threeyears,reachingaUS$16trnannualrunrate,US$4.5trnhigherthanin2025.

Inthisreport,weunderscoreourbullishnessontheindustrialcycleandexplainwhyweseeAsia’sindustryenteringitsbestcyclesincethemid-2000s.WedelveintothestructuraldriversofAIandAI-relatedinfrastructure,energyandenergytransition,anddefensecapex–andhighlighthowthesewillcatalyseabroadercapexand

industrialcycleforAsia.

MoRGANSTANLEyAsiALimiTED+

ChetanAhya

ChiefAsiaEconomist

Chetan.Ahya@

+8522239-7812

MoRGANSTANLEyAsiA(SiNGApoRE)PTE.

DerrickYKam

AsiaEconomist

Derrick.Kam@

+656834-8272

MoRGANSTANLEyAsiALimiTED+

JonathanCheung

Economist

Jonathan.Cheung@

+8522848-5652

KellyWang

Economist

Kelly.Wang@

+8523963-0891

MoRGANSTANLEyINDiACompANyPRivATELimiTED+SudhanshuAgarwal

Economist

Sudhanshu.Agarwal@

+91226995-4568

Foranalystcertificationandotherimportantdisclosures,refertotheDisclosureSection,locatedattheendofthisreport.

2

Morganstanley

RESEARCH

AsiAPAcificINsiGHt

AsialsMovingTowardsanlndustrialSuper-cycle

Whytheindustrialcyclewillcomeroaringback:Priortotheonsetofgeopolitical

tensions,wehadlaidouttheevidenceforwhyAsia’sindustrialcycleisinflectinghigher

(2026AsiaEconomicsOutlook:FromTechtoNon-Tech–TheRecoveryBroadens,

Nov16,2025and

TheViewpoint:Asia’sindustrialcycleisinflecting)

.TheCRBrawmaterialsindexhasbeenmovingup,reachingafour-yearhighandreflectingthisindustrialrecovery.Theonsetofgeopoliticaltensionswilldentthemomentuminthenearterm.Butif/when

geopoliticaltensionsease,wethinkthatthestructuraltailwindsoftheindustrialcyclewillreassertthemselves,andtheindustrialcyclewillcomeroaringback.

Thiswillbethestrongestindustrialcyclesincethemid-2000s:Consideringthe

structuraldrivers,webelievethatthisindustrialcycleinAsiawillbesustainedatahigh

levelforamulti-yearperiod.Avarietyofindicatorslinkedtotheindustrialcyclehave

alreadyreachedtheir2017-18highs.Butweseefurtherbuildupofmomentuminthe

industrialcyclethatwouldbringittothestrongestsincethemid-2000s.Between2003-07,Asiawasundergoingaperiodofrapidindustrialization.Moreover,theindustrialcyclelinesupexactlywithAsia’sdominantpositioninmanufacturingandallowsavirtuouscycletotakehold.ThestructuralriseinspendingonAIandAI-relatedinfrastructure,energyandenergytransition,anddefensewillcatalyseabroad-basedpickupincapex.Moreover,as

theriseincapexbringsaboutstrongjobcreationandwagegrowth,itwillinturnliftconsumptiongrowthandsustainthecapexcycle.

WeprojectcapexinAsiatogrowat3xthepaceinrecentyears...WeforecastthatAsia’scapexwillreachUS$16trnin2030,upfromUS$11trncurrently.ThisimpliesaCAGRof7%overthenextfiveyears,~3xthepaceofgrowthover2023-25.Putanotherway,theUS

$4.5trnprojectedriseincapexwillbeachievedoverthenextfiveyears.Incontrast,ittook

12yearsforAsiatopostthesamedeltaincapexpreviously.

...ledbyrisingcapexshareinstructuraldrivers:Crucially,theriseincapexwouldbe

drivenbynewstructuraldemanddriversofAIandAIinfrastructurespending,energyandenergytransition,anddefensespending.Weexpecta16%CAGRincapexinthesenew

driversoverthenextfiveyears.

ThisisinlinewithourEMAsiaequitystrategyteam'sviews:theyalsoexpectasuper-cycleofinvestmentinsecurity(Energy,Economic&Military)andAIComputingtodrivea

strongoutlookfortheIndustrials,Materials,andEnergysectors,whiletheyexpect

Consumer/Servicestolag(see

InvestorPresentation:AsiaThematic&EquityStrategy:

InvestinginAsia’sCompetitiveReinvention,

24April2026).

Morganstanley

RESEARCH

AslAPAclFlclNslGHT

Exhibit1:Asia’sgrossfixedinvestmenttoriseto$16trnby2030

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

2023

2024

2025

2026

2027

2028

2029

2030

Asiagrossfixedinvestment*(US$trn)

18

16

14

12

10

8

6

MSf'cast

2030E:$16trn

2025E:$11trn

4

Source:CEIC,Haver,IEA,LowyInstitute,MorganStanleyResearchestimates;Note:*WeexcludeChinarealestatecapexgiventhestructuraldeclineinpropertydemand.

Exhibit3:Asia’sgrossfixedinvestmenttoincreaseata7%CAGRfrom2026-2030

Asianominalinvestment(US$trn)

18

16

16

7%CAGR

14

12

11

10

8

6

4

2

0

20252030

Source:CEIC,Haver,IEA,LowyInstitute,MorganStanleyResearchestimates;Note:*WeexcludeChina'srealestatecapexgiventhestructuraldeclineinpropertydemand.

Exhibit2:Ourequipmentcapexproxy–capitalgoodsimports–isacceleratingtobeyond2017-18highs(excludingthepickupin2021-22)drivenbyCovidbaseeffects

3mma)——Global

Covidbaseeffects

20%

15%

10%

5%

0%

-5%

-10%

Capitalgoodsimports(%Y

25%

Lastsynchronousglobalcapexcycle

Asia

Feb-15

Feb-16

Feb-17

Feb-18

Feb-19

Feb-20

Feb-21

Feb-22

Feb-23

Feb-24

Feb-25

Feb-26

-15%

Source:Haver,CEIC,MorganStanleyResearch

Exhibit4:Theriseincapexistobedrivenbynewstructuraldemanddrivers–AIandAIinfrastructurespending,energyandenergytransition,anddefensespending

Otherbroaderindustrialandintellectualpropertycapex

Investmentinhighgrowthsectors9

10%CAGR

16%CAGR2

Asianominalinvestmentinhighgrowthsectors(US$trn)

20252030

10

9

8

7

6

5

4

3

2

1

0

5

4

4

5

Source:CEIC,Haver,IEA,LowyInstitute,MorganStanleyResearchestimates;Note:*WeexcludeChina'srealestatecapexgiventhestructuraldeclineinpropertydemand.

MoRGANSTANLEyREsEARcH3

Morganstanley

RESEARCH

AsiAPAcificINsigHt

4

AMulti-yearlndustrialCycleBackedbyMultipleDrivers

Weseeasustainedriseintheindustrialcycle

Asia’sindustrialcapexcycleisbackedbymultipledrivers:(1)AIandAI-related

infrastructure,(2)energyandenergytransition,(3)defense,and(4)spillovertobroaderindustrialcapex.Thisisnolongerjustaboutacyclicalreboundtiedto

strengthintechexports.Thisisincreasinglyacapexcycletiedtostructuralriseinspendingacrosstheseareas.Atthesametime,thestrongerspendinginthese

areaswillgeneratepositivespilloversandfurthercatalyseoverallcapex.

Fourreasons

1)AIandAIrelatedinfrastructure–thebulkofthespendingisahead

AIremainsthetoppriorityforCIOs,with39%ofCIOscitingAI/machinelearningastheir#1priority(upfrom34%in4Q25),per

ourlatestCIOsurvey.

Againstthisbackdrop,theimmediatebenefittoAsiaasthekeydominantsupplierofAIchipswillbearenewed

capexwaveamongstthechipmanufacturers.ShawnKim,ourheadofAsinatechnologyresearch,andCharlieChan,ourheadofGreaterChinasemiconductorresearch,notethatSamsung,SKhynix,TSMC,andSMICwillcollectivelydevoteUS$250bntocapexannuallyby2028,upfromUS$105bnin2025.ShawnalsoestimatesthatagenticAIworkloadswilladdupto$60bninincrementalCPUTAMby2030(see

riseoftheAIAgent–Global

Implications,

April19,2026).

Over2026-28,MorganStanleyResearchestimatesthatglobalcapexonAIdatacenterswillreachUS$2.8trillion.Inlinewithourglobalcapexestimates,weexpecta33%CAGRinAIdatacentercapex(includingtheconstructionofdatacenters,costofchipsand

servers,andpowergenerationneededtosupportAI).Formoredetails,pleasesee

The

WorldThroughaThematicLens:Predictions,DebatesandStructuralChange,

January18,2026).

TheUShasbeenleadingonAIcapex,butAsia'scorporatesectorwillhavetoaccelerateAIandrelatedinfrastructurespending.Withintheregion,Chinahasbeenthemost

aggressiveinliftingAI-relatedspending.OurInternetanalystforChina,GaryYu,alsoexpectsa30%CAGRincapexfromChina'shyperscalersoverthenexttwoyears(see

China'sEmergingFrontiers:China'sAIPath:MonetizingSurgingTokenUseviaAICloud,

March16,2026).

2)Energyandenergytransition-related–Infrastructurespendingwillgetanadditionalboostfromgeopoliticaltensions

Chinahasbeenleadingtheregionincapexrelatedtoenergytransition,buttherestoftheregionhadaccelerateditsspendingbeforetherecentgeopoliticaltensions.Therenewableenergyinvestmentsaretriggeringadditionalcapexinenergystoragesystems,powergrids,andtransmissionlines.

MoRGANSTANLEyREsEARcH5

Moreimportantly,thesamegeopoliticaltensionsthatraiseoilandgascostsarealso

leadingpolicymakerstorethinktheirenergysecurityandtospendmoreoncreating

resilienceintheirenergyneeds,especiallyforenergytransition.Weexpectaa10%CAGRinoverallenergycapex(includingbothfossilfuelsandrenewableenergy)from2026-30,fasterthanthe6%CAGRover2015-25.

3)Defensespending–movinghigheronthepolicyagenda

Asitwasbeforetherecentgeopoliticaltensions,policymakersaroundtheregionhad

committedtohigherdefensespendinginthecomingyears.Forinstance,Japan,Korea,andTaiwanhavecommittedtoliftingdefensespendingto2%,3.5%,and5%ofGDP,

respectively,overthemediumterm(up0.7ppt,1.2ppt,and2.6pptfrom2025,

respectively).Indiahadannouncedan18%increaseindefensespending(ex-personnelcost).

InadditiontotheincreasedspendingcommitmentswithinAsia,therewillberestockingdemandfromotherregions,inturnbenefitingAsiandefenseexporters.Wehaveassumed,somewhatconservatively,apotential10%CAGRinAsia’sdefensecapex,,astepupfromthe6%CAGRover2018-25.

4)Broaderindustrialcapex–beneficiaryofpositivespillovers

Theriseinspendinginthethreesegmentsabovewillcatalyseabroadercapexand

industrialcycleasthefulleffectsworkthroughtheentiresupplychain.Therewillbeapositivereinforcementloop.

•AIdeploymentneedsdatacenters,power,cooling,andnetworkinfrastructure.

•Energysecurityneedsmoregeneration,storage,transmissionandfuelredundancy.

•Defensespendingneedsequipment,electronics,logistics,andmanufacturingcapacity.

•Multipolarityneedsduplicatedsupplychains,localizedplants,andmoreautomation.

Moreover,asourglobalheadofthematicresearch,StephenByrd,notes,economiesaroundtheworldaretrying“toeliminatetheirdependenceonothersforthemost

importantdriversofnationaleconomichealthandprosperity:fromenergytonationalsecuritytotechnologicalcompetitiveness.”

Tobeclear,thesearenotjuststandalonefactors–theyareintertwinedandwillhaveaneffectontheindustrialcyclethatwillbegreaterthanthesumoftheirparts,giventhattheywillhaveknock-oneffectsoneachother.

Moreimportantly,theriseincapexwillalsospilloverpositivelytoothersegments.Forinstance,itwilldrivethedemandformachineryequipmentandcommoditiesthatfeedintothesedrivers,whichwillthenleadtoknock-oneffectsastheserelatedsectors(forinstance,theproducersofcapitalgoods)raisetheirowncapex.

Inaddition,astheinitialriseincapextakesoff,thiswillhelptocatalysejobgrowthandwagegains,inturnliftingconsumption–whichwillthenalsodrivecapexinthe

consumption-linkedsectorshighertoo.

6

Exhibit5:Theriseinspendinginthethreesegmentsabovewillcatalyseabroadercapexandindustrialcycleasthefulleffectsworkthroughtheentiresupplychain

AsiaexChinaexIndia

25%

20%

15%

10%

5%

0%

-5%

-10%

Capitalgoodsimports(%Y,3MMA)

GFCF:MachineryandEquipment,IntellectualProperty(%Y,RS)

7%

5%

0%

-5%

15%

10%

23%

Source:Haver,CEIC,MorganStanleyResearch;Note:GFCFinrealterms.GFCFbreakdownisnotavailableforChina,andonlyannualdataisavailableforIndia.

•WeforecastthatAsia’scapexwillreachUS$16trnin2030,upfromUS

$11trncurrently.ThisimpliesaCAGRof7%overthenextfiveyears,~3xthepaceofgrowthover2023-25.

•TheaccelerationinoverallcapexwillbesupportedbyamuchfasterpaceofgrowthintheareasofAIandAI-relatedinfrastructure,energyandenergytransitionrelatedanddefensespending.Weexpectthesesegments

combinedtoexpandata16%CAGRover2026-30.

•Includingthepositivespillovertobroaderindustrialcapex,weestimate

thatthespendinginthesefoursegmentswillrisetoaUS$9trnannualrunratein2030,upfromUS$5trnin2025.

Whobenefitsmorefromtheupswingintheindustrial/capexcycle?

WhilethiswillbeanupswingthatwillliftalleconomiesinAsia,giventheregion’s

inherentstrongcapabilitiesinmanufacturing,therewillstillbesomeeconomieswhichwillbenefitmore.

WehighlightTaiwan,Korea,China,andJapan:TheyaremoreexposedtothehighgrowthsectorsofAI,energyanddefense,andtheseeconomieswillbenefitfromapickupin

domesticcapexandexportopportunities.

Indiawillalsobenefit–fromthepickupintheindustrialcycle,alongsideapickupin

domesticcapexviatheboosttodomesticdemandfromeasyfiscalandmonetarypolicies.Fromamarketperspective,thisalsolinesup,giventhattheindustrialsectoraccountsforalargerweightintherespectivemarkets’MSCIindices.

MoRGANSTANLEyREsEARcH7

AustraliaandIndonesiawillwillbenefitascommodityexporters:TheCRBraw

materialsindexhasbeenmovinghighertoreachafour-yearhigh,reflectingthisindustrialrecovery.

Exhibit6:WehighlightTaiwan,Korea,China,andJapan–theyaremoreexposedtoapickupindomesticcapexandexport

opportunitiesinthehighgrowthsectorsofAI,energyanddefense

Secondaryindustry(exmining)toGDP

33%

30%29%

27%27%26%26%

24%

14%

45%

40%

35%

30%

25%

20%

15%

10%

5%

0%

43%

34%

Taiwan

Korea

China

Indonesia

Asia

Japan

Thailand

Malaysia

Philippines

India

Australia

Source:Haver,MorganStanleyResearch;PPPweightedaverageusedforAsia.

7%

6%

5%

4%

3%

2%

1%

0%

Asiaindustrial

20%production(%Y,

a)windustrials5.9%15%

index(%Y3MMA,

RS)10%

9.0%

5%0%-5%

-10%

-15%

-20%

Exhibit8:TheCRBrawmaterialsindexhasbeenmovinghighertoreachafour-yearhigh,reflectingthisindustrialrecovery

Mar-17

Sep-17

Mar-18

Sep-18

Mar-19

Sep-19

Mar-20

Sep-20

Mar-21

Sep-21

Mar-22

Sep-22

Mar-23

Sep-23

Mar-24

Sep-24

Mar-25

Sep-25

Mar-26

Source:Haver,Bloomberg,MorganStanleyResearch

Exhibit7:Fromamarketperspective,thisalsolinesup,giventhattheindustrialsectoraccountsforalargerweightinthe

respectivemarkets’MSCIindices

MSCIsectorweights:Industrials(broadmeasure)

90%

78%

54%

41%40%

35%

23%20%18%17%

2%

100%

90%

80%

70%

60%

50%

40%

30%

20%

10%

0%

Taiwan

Korea

China

Asia

Japan

Thailand

Malaysia

Philippines

India

Indonesia

Australia

Source:Factset,MorganStanleyResearch;Note:Ourbroadmeasureofindustrialscoversindustrials(capitalgoods),non_miningmaterials(e.g.chemicalsandconstructionmaterials),utilities,andIT

hardwareandsemiconductormanufacturing.PPPweightedaverageusedforAsia.

Exhibit9:Riseincommoditypriceswillbenefitthecommodityexporters,AustraliaandIndonesia

MSCIsectorweights:Metals&Mining

24%

25%

20%

15%

10%

5%

0%

0.3%

6%

8%

6%

0%

5%

5%

0%

1%

1%

Australia

Indonesia

China

Malaysia

Asia

India

Japan

Korea

Taiwan

Philippines

Thailand

Source:Factset,MorganStanleyResearch;Note:Ourbroadmeasureofindustrialscoversindustrials(capitalgoods),non_miningmaterials(e.g.chemicalsandconstructionmaterials),utilities,andIT

hardwareandsemiconductormanufacturing;PPPweightedaverageusedforAsia.

8

Morganstanley

RESEARCH

AslAPAclFlclNslGHT

Startingfromapositionofcyclicalstrength

Beforegeopoliticaltensions,wehadagrowingbodyofevidencethattheindustrialcyclewasalreadygoingfromstrengthtostrength(see

SundayStart:What'sNextinGlobal

Macro-TheFace-OffforAsia:EnergyPricesvIndustrialCycle,

April5,2026).

•Asia'sPMIhadrisentoafour-and-a-half-yearhighinFebruaryonabroadbase.

•Asia’sindustrialproductiongrowth(excludingthesteelandcementsectorsIPin

Chinatoremovethedragfromthepropertysector)reached5.9%Y,closetoafour-yearhighandjustbelowthe2017-18cyclehighof6.3%Yifweexcludethebase

effectsdrivensurgeduringCovid.

•Importantly,non-techexports–whichweresoftformuchof2025–haveinflectedsince4Q25.

GiventhestronglinkagebetweenAsia’snon-techexportsandthecapexcycle,growthinimportsofcapitalgoods–thekeymonthlycapexproxy–wasalsoacceleratingtolevelsbeyond2017-18peaks–i.e.,thelastsynchronousglobalcapexcycle.Sincethen,harddataforMarch-earlyApril,includingtrade,suggestsomedragfromthegeopoliticaltensions,thoughtheeffectobservedsofarhasbeenmoremodestthanthesharpstepdowninsoftindicatorssuchasPMIsandbusinessconfidencewouldindicate.

Exhibit10:Asia’sindustrialproductiongrowthnearingafour-yearhighandclosetopeaklevelsreachedduring2017-18

Asiaindustrialproduction

%Y%Y3MMA

5.9%

5.4%

8%

7%

6%

5%

4%

3%

2%

1%

0%

-1%

Feb-15

Feb-16

Feb-17

Feb-18

Feb-19

Feb-20

Feb-21

Feb-22

Feb-23

Feb-24

Feb-25

Feb-26

Source:Haver,CEIC,MorganStanleyResearch

Exhibit12:Non-techexportshaveinflectedhigher

Asianominalnon-techgoodsexports(SA,Dec-24=100)

Non-techexportshaverisenbyanannualizedrunrateof36%sinceOct-25whentheUSsignedtradedealswithmostAsiaeconomies

115

113

111

109

107

105

103

101

99

97

95

112

Dec-24

Jan-25

Feb-25

Mar-25

Apr-25

May-25

Jun-25

Jul-25

Aug-25

Sep-25

Oct-25

Nov-25

Dec-25

Jan-26

Feb-26

Source:Haver,CEIC,MorganStanleyResearch

Exhibit11:PMIswereatfour-and-a-halfyearhighinFebruarybeforethedragfromgeopoliticaltensions

HeadlinemanufacturingPMI

GlobalAsia

Oilpricerise

effect

56

55

54

53

52

51

50

49

48

Mar-15

Sep-15

Mar-16

Sep-16

Mar-17

Sep-17

Mar-18

Sep-18

Mar-19

Sep-19

Mar-20

Sep-20

Mar-21

Sep-21

Mar-22

Sep-22

Mar-23

Sep-23

Mar-24

Sep-24

Mar-25

Sep-25

Mar-26

Source:Haver,CEIC,MorganStanleyResearch

Exhibit13:Anupturninthecapexcyclewasunderway,asproxiedbythestrengthincapitalgoodsimports

3mma)Global

Covidbaseeffects

20%

15%

10%

5%

0%

-5%

-10%

Capitalgoodsimports(%Y

25%

Lastsynchronousglobalcapexcycle

Asia

Feb-15

Feb-16

Feb-17

Feb-18

Feb-19

Feb-20

Feb-21

Feb-22

Feb-23

Feb-24

Feb-25

Feb-26

-15%

Source:Haver,CEIC,MorganStanleyResearch

Morganstanley

RESEARCH

AsiAPAcificINsigHt

MoRGANSTANLEyREsEARcH9

Geopoliticaltensions–anear-termdragandriskbutacatalystbeyondthenearterm

Weacknowledgethatitisdifficulttopredicttheoutlookforgeopoliticaltensionswithahighdegreeofconfidence.Indeed,geopoliticaltensionsmaybringaboutelevatedenergypricesandpotentialsupplydisruptionrisks,leadingtodelaysintheupturninthenear

term.

Butbeyondthat,webelievethatthegeopoliticaltensionswillalsobeacatalystwhich

willbringaboutastrongercapeximpulsebeyondthenearterm.Ifgeopoliticaltensions

easeandoilpricesmovebelowUS$90/bblinthecoming4-5months(accompaniedby

similarmoveslowerinphysicaldeliveryprices),wethinktheindustrialcyclewillcome

roaringback.Theriskisthatifoil(futures)pricesweretobesustainedaroundUS$120/bbl(andphysicaldeliverypriceswouldmostlikelybehigherthanthat),thenthecyclical

headwindswouldoverwhelmtheunderlyingstructuraldrivers.

WhytheindustrialcyclemattersforAsia

Asiaaccountsforalmost50%oftheworld’sindustrialsector’svalueadded.AcrossAsia,theindustrialsectoraccountsfor33%ofGDP(witharangeof25-40%).

Hence,theshiftsintheindustrialcyclewillhaveaheavyinfluenceonhowthemacrooutlookforAsiawillevolve.

Asiaiswellpositionedbecauseitistheworld'slargestindustrialbase.Moreover,itisakeynodeintheAIsupplychainaswellasfortheenergytransitionanddefensesectors.AsiaisalsoaproducerofintermediateproductsaswellascapitalgoodsthatareneededtomanufactureexportsofkeyAIhardware,AIinfrastructure,

energy-transitioninputs,anddefenseexports.Finally,itsspendingonAIandAI-related,energyandenergytransition-related,anddefenseisalsorising.

Inotherwords,Asia’sindustrialcyclewillbenefitfromincreasedglobalcapexaswellasbeabeneficiaryofitsownincreasedcapex.

Exhibit14:Asiaaccountsfor46%oftheworld’sindustrialsector’svalueadded

Shareinglobalmanufacturingvalueadded(%,2024)

50%

46%

45%

40%

35%

30%

25%

20%

17%

14%

15%

10%

5%

0%

AsiaUSEuroarea

Source:Haver,CEIC,MorganStanleyResearch

12%

10%

8%

6%

4%

2%

0%

-2%

Asiaindustrialproduction

(%Y3MMA)

Asiaexports(%Y3MMA,

RS)

11.8%15%

10%

5.9%

0%

-5%

-10%

-15%-20%

25%

20%

Exhibit15:Asia’sindustrialandexportscyclearecloselylinked

5%

Feb-17

Feb-18

Feb-19

Feb-20

Feb-21

Feb-22

Feb-23

Feb-24

Feb-25

Feb-26

Source:Haver,CEIC,MorganStanleyResearch

10

Exhibit16:Tariffsandtariffuncertaintywerelowered

6%

4%

DeltaonUStradeweightedtariffrateonAsianeconomies

4%

post-Supremecourtdecision

(weightedaveragebasedonNov-Dec2025tradedata)

2%

0%0%0%

0%

-1%

-1%

-2%

-2%

-2%

-2%-3%

-4%

-6%

China

Indonesia

Vietnam

Philippines

Malaysia

Thailand

India

Korea

Taiwan

Japan

Australia

-7%

-8%

Source:Haver,

W

,MorganStanleyResearchEstimates

Exhibit17:LessrestrictiveUSmonetarypolicy

Dec-17

Dec-18

Dec-19

Dec-20

Dec-21

Dec-22

Dec-23

Dec-24

Dec-25

Dec-26

MSforecastUSrealpolicyrate(oncorePCE,%)

4

2

0

-2

-4

-6

Source:Haver,CEIC,MorganStanleyResearchEstimates

MoRGANSTANLEyREsEARcH11

DelvingDeeperintotheStructuralTailwindsforAsia)slndustrialCycle

Theenergyshockdentsnear-termmomentum–butisalsoamedium-termcatalyst:

Higheroilandgaspricesareobviouslyataxongrowthinthenearterm.Butthesame

shockalsoacceleratescapitalspendingonstrategicresilience.Governmentsand

companiesthatworryaboutimportedfueldependence,LNGbottlenecks,orgridfragilitydonotrespondonlybyabsorbingthehit.Theydosoalsobystrengtheningthesystem:

moregridinvestment,morestorage,morebackupgeneration,morenatural-gas

infrastructure,morerenewables,morenuclear,andmorebehind-the-metersolutions.Thatmeanstheenergyshockwilllikelyreshapeandovertimereinforcestheindustrialcycle.

Fivereasonsthenextphaseoftheindustrialcyclewillbemorebroad-basedthanpreviouscycles:

1.Theexportrecoveryisalreadyspreadingbeyondthetechcomplex,whichmeansthatthedemandmixiswidening.

2.Domesticspendingmattersmorethistimebecausegovernmentsandcompaniesareinvestinginpower,AIinfrastructure,anddefensesimultaneously.

3.ThebeneficiarysetisgeographicallybroaderbecausemultipolarityencouragesseveralAsianmarketstobuildorhostnewcapacity.

4.Asia’sratioofcorporatedebttoGDPisalsolowerthanthepre-Covidlevel,suggestingthatthereissignificantroomtofundprivatecapex.

5.Finally,partofthespendingispolicy-orsecurity-driven,whichmeansthatahigherfloorwillbemoresustainedbecauseitwillalsobelesssusceptibletoshiftsincorporateconfidence.

IncreasesinAIinfrastructure,energytransition-related,anddefensespendingthekeydrivers:Alongsidecyclicaldrivers,weseefourdriversthatwouldhelpdriveafurther

improvementinAsia’sindustrialandcapexcycle.Domestically,Asianeconomiesareliftingspendingonenergytransition-related,AIinfrastructure,anddefensespending,whichwillliftindustrialproduction.Inaddition,Asianeconomieswillalsohavetoproduceeven

moretofeedtheexportmarket,giventhatothereconomiesoutsideofAsiaarealsoliftingtheirspendinginthesam