The 15-strong Morgan Stanley team helmed by Kevin Luo and Huaxiang (Edward) Xu claims the No. 3 position on this roster, which has been expanded to include tracking of infrastructure and transportation companies. The firm captured third place in Industrials last year, and while Luo is a newcomer, Xu led the firm’s No. 2 crew in Transportation in 2013 as well as its runner-up squad in Infrastructure. Stationed in Hong Kong, Jakarta, Mumbai, Seoul, Singapore and Sydney, the researchers cover 110 Asian industrials stocks. In general, they expect the sector to perform in line with the broader market going forward and project that the logistics segment will outperform. In China, although increasing investor worries about that nation’s economy have suppressed the performance of its Hong Kong–listed construction and machinery players, the analysts look for both groups to best the Hang Seng Index this year. “We expect leading construction companies to maintain steady growth in China, while their overseas expansion will likely accelerate,” explains Luo, “driven by more financial support from the government and long-term bank loans to other developing countries’ infrastructure projects.” China’s machinery outfits, meanwhile, will experience a mild recovery through next year, he adds, supported by rising replacement demand and stable downstream investment growth. Among the names they deem worthy of overweighting are Hong Kong–based marine shipping services provider SITC International Holdings Co., thanks to “the company’s niche exposure to the fast-growing trading activities among China, Japan and the ASEAN countries, a good management track record and a strong balance sheet,” says Xu. “Kevin and Edward’s team is good for providing detailed information and good organization of China trips,” avers one fund manager. |
The 2014 All-Asia Research Team: Industrials, No. 3: Kevin Luo, Huaxiang (Edward) Xu & team