< The 2016 All-Asia Research Team
Kevin Luo,
Huaxiang (Edward) Xu & team
Morgan Stanley
First-Place Appearances: 3
Total Appearances: 18
Team Debut: 2000
Capturing first place on this revised roster is Morgan Stanley’s 15-person team directed by Kevin Luo and Huaxiang (Edward) Xu, who led their squad to No. 1 on the broader Industrials category last year. Now Transportation is again a stand-alone sector, and Xu guides a crew to No. 1 on that lineup as well; in addition, the group he manages with Young-Ah Han claims the crown for its reporting on China. Working out of Hong Kong, Luo and Xu oversee reporting on 140 Asia ex-Japan industrials, winning praise from one portfolio manager for their “diversified coverage and broader view of capital goods.” In particular, observes another fan, they closely monitor such subsectors as logistics; offshore marine services; and maintenance, repair and operations providers. Additional investors value the researchers’ modeling and industry insight, stock-picking ability and resourcefulness. Xu, 40, highlights China’s aerospace and defense names as attractive, based on robust demand driven by that nation’s military modernization, military-civilian integration and industry reforms. Those that are technologically savvy and have strong M&A capabilities are especially attractive, the analysts believe, such as China Aviation Optical-Electrical Technology Co. and Guangzhou Haige Communications Group. Among Hong Kong–listed stocks, their top pick is AviChina Industry & Technology Co., thanks to its attractive valuation its core assets for helicopters and avionics. Thirty-four-year-old Luo notes the group’s optimism that some segments of China’s industrials market will enjoy an earnings recovery in the year ahead. “We prefer infrastructure construction, construction machinery and heavy trucks, while we are cautious in the near term on railway equipment,” he says. “The heavy duty truck subsector has long-term upside potential for [price] and margin gains driven by emission standard upgrades and industry consolidation.” Sinotruck Hong Kong is the researchers’ favorite play on that front, while CRCC High-Tech Equipment Corp. is select for infrastructure exposure.