Morgan Stanley is bearish on Asian tech stocks: "Overbought and expensive, it's time to exit"

Asian technology stocks are facing the most severe wave of selling since the outbreak of the pandemic.

In recent days, driven by "rate cut trades" and "Trump trades", the US stock market has experienced a rotation from large-cap tech stocks to laggards including consumer stocks and small-cap stocks. Last week, amid a cooling AI trend and a collective pullback in US tech stocks, Asian technology stocks plummeted collectively.

On Monday, Asian technology stocks continued to decline, with Bloomberg's Asia Pacific Semiconductor Index falling by 3%, poised to mark the most severe four-day decline since March 2020.

Analysts from Morgan Stanley, led by Jonathan Garner, recently released a research report stating that tech stocks currently appear "overbought and expensive", suggesting that it's time to "exit and observe".

The report downgraded the rating of Asian tech stocks and removed AI concept stocks including TSMC and SK Hynix from the list of key recommendations.

Morgan Stanley stated a preference for shifting towards consumer stocks ahead of the Fed's rate cut in September, upgrading the industry's rating to "hold" for the first time in five years. The report explained that the expectations for major consumer industries by 2026 are "not high" and are "significantly defensive in the context of a global economic slowdown".

Garner also added that they have not completely abandoned tech stocks, believing that the "upcoming AI smartphone cycle" remains a key point of interest, listing Samsung Electronics and Hon Hai, the parent company of Foxconn, as key recommendations.

It is reported that in October 2022, Morgan Stanley upgraded Asian technology stocks to a "hold" rating for the first time to date