Docstoc

Morgan stanley -Japan risk reward

Document Sample
Morgan stanley -Japan risk  reward Powered By Docstoc
					                                                             MORGAN                                           STANLEY                                                RESEARCH
                                                             ASIA/PACIFIC


                                                             Morgan Stanley Asia Limited+                                                                   Jonathan F Garner
                                                                                                                                                            Jonathan.Garner@morganstanley.com

                                                             Morgan Stanley MUFG Securities                                                                 Robert Alan Feldman, Ph.D.
                                                             Co., Ltd.+                                                                                     Robert.Tokyo.Feldman@morganstanleymufg.com

                                                             Morgan Stanley MUFG Securities                                                                 Le Ngoc Nhan
                                                             Co., Ltd.+                                                                                     Le.Ngoc.Nhan@morganstanleymufg.com

April 15, 2013                                               Morgan Stanley Asia Limited+                                                                   Calvin Tse
                                                                                                                                                            Calvin.Tse@morganstanley.com


Asia/GEMs Equity
Strategy
                                                             TOPIX Price Relative to 200-Day Moving
Japan risk / reward                                          Average: More than 3 SDs Overbought

deteriorates                                                  50%

                                                              40%                                                                                                                                                                                                       37.4%
                                                                               +3 S.D                        31.8%
                                                              30%
                                                                               +2 S.D                        21.0%
                                                              20%
The risk / reward equation has started to deteriorate                          +1 S.D                        10.2%
                                                              10%
for Japan equities. Topix has traded up to within 10%          0%                                                                Average

of our scenario-weighted year-end 2013 Target Price of       -10%
1,270. We remain strategically bullish and expect further    -20%
                                                                              -1 S.D              -11.5%

                                                                              -2 S.D          -22.3%
progress on the journey towards successful reflation and     -30%
                                                                              -3 S.D          -33.1%
potentially a bull case scenario of Topix 1,700. However,    -40%

our tactical concerns are the following:                     -50%



                                                                     Jul-93
                                                                                Jul-94
                                                                                         Jul-95
                                                                                                    Jul-96
                                                                                                              Jul-97
                                                                                                                        Jul-98
                                                                                                                                 Jul-99
                                                                                                                                          Jul-00
                                                                                                                                                   Jul-01
                                                                                                                                                            Jul-02
                                                                                                                                                                     Jul-03
                                                                                                                                                                              Jul-04
                                                                                                                                                                                        Jul-05
                                                                                                                                                                                                  Jul-06
                                                                                                                                                                                                            Jul-07
                                                                                                                                                                                                                      Jul-08
                                                                                                                                                                                                                                Jul-09
                                                                                                                                                                                                                                          Jul-10
                                                                                                                                                                                                                                                    Jul-11
                                                                                                                                                                                                                                                              Jul-12
1) Valuation deterioration. Absolute P/B is at 1.32x
versus a trough of 0.88x, whilst relative P/B to DM is at
0.7x, already back to the 20-year average. Versus EM,        TOPIX Trailing P/Book relative to MSCI
Topix at its most expensive since 2002/2004.                 World – already back to the 20-year average
                                                              1.1x

2) Consensus earnings forecasts raised. Consensus
                                                              1.0x
for 2013E Topix EPS has now risen to +45% and has
almost caught up with our +50% top-down forecast.             0.9x


                                                              0.8x
3) Currency has reached our near-term target. Yen /
                                                                                                                        Average
dollar has reached our near-term Q2 target of 100.            0.7x                                                                                                                                                                                                      0.68x

Whilst we expect structural yen weakness over a               0.6x
multi-year time frame, it is also notable that we forecast
                                                              0.5x
the pace of future yen declines to be much milder than
witnessed over the past few months                            0.4x
                                                                     Jul-93
                                                                                Jul-94
                                                                                         Jul-95
                                                                                                    Jul-96
                                                                                                               Jul-97
                                                                                                                        Jul-98
                                                                                                                                 Jul-99
                                                                                                                                          Jul-00
                                                                                                                                                   Jul-01
                                                                                                                                                            Jul-02
                                                                                                                                                                     Jul-03
                                                                                                                                                                               Jul-04
                                                                                                                                                                                         Jul-05
                                                                                                                                                                                                   Jul-06
                                                                                                                                                                                                             Jul-07
                                                                                                                                                                                                                       Jul-08
                                                                                                                                                                                                                                 Jul-09
                                                                                                                                                                                                                                           Jul-10
                                                                                                                                                                                                                                                     Jul-11
                                                                                                                                                                                                                                                               Jul-12

4) Lack of further near-term catalyst post the BoJ.
Further impact on the macro outlook from policy must         Note: Data as of Apr 11, 2013

come largely from “Third Arrow” (microeconomic reform)       Source: MSCI, RIMES, Morgan Stanley Research

policies, which involve many more decision makers,
require much more coordination, and often take much
more time to implement and impact the economy.
                                                             Morgan Stanley does and seeks to do business with
5) Technically very overbought. Topix is more than           companies covered in Morgan Stanley Research. As
3 SDs overbought on a 200-day moving average basis           a result, investors should be aware that the firm may
(the most in 20 years). Two of our three preferred           have a conflict of interest that could affect the
sectors (Financials and Consumer Discretionary) are          objectivity of Morgan Stanley Research. Investors
                                                             should consider Morgan Stanley Research as only a
the most overbought.
                                                             single factor in making their investment decision.
6) Bottom-up analyst upside. Average bottom-up               For analyst certification and other important
upside to Target Price for the Morgan Stanley                disclosures, refer to the Disclosure Section,
                                                             located at the end of this report.
analyst-covered 50 largest cap names is now -6%
                                                             += Analysts employed by non-U.S. affiliates are not registered with FINRA, may not be
                                                             associated persons of the member and may not be subject to NASD/NYSE restrictions on
                                                             communications with a subject company, public appearances and trading securities held by a
                                                             research analyst account.
                                                                                                                                          MORGAN           STANLEY           RESEARCH

                                                                                                                                          April 15, 2013
                                                                                                                                          Asia/GEMs Equity Strategy




Risk / reward starts to                                                                                                                   Change: April MPM Review, dated April 4, 2013). Over time, a
                                                                                                                                          further successful journey for Japan towards reflation has the
deteriorate in Japan (& improve                                                                                                           potential to propel the market beyond our current scenario-
                                                                                                                                          weighted Target and towards our Bull Case scenario of 1,700.
elsewhere)                                                                                                                                However, that requires delivery in both the economic and
                                                                                                                                          corporate earnings dimensions. Specifically, we would
The purpose of this note is to highlight that the risk / reward
                                                                                                                                          highlight the remaining steps in our original realization and
equation has started to deteriorate for Japan equities, as Topix
                                                                                                                                          confirmation phases, as shown in Exhibit 3. For more details
has traded up to within 10% of our scenario weighted Target
                                                                                                                                          see below.
Price of 1,270. It has risen by 61% in yen terms since the
trough last October (27% in US$). Exhibit 1 shows our current                                                                             Exhibit 3
Bull, Base, Bear Targets and associated Target P/E and                                                                                    10 point checklist: MS Roadmap to the Japan Bull
earnings assumptions. Exhibit 2 shows the evolution of our                                                                                Case. What we can check off as of today
Topix Target Price since assumption of coverage.
                                                                                                                                                                 ☑ (1) Stable political environment
Exhibit 1                                                                                                                                                        ☑ (2) Pursue Fiscal+Monetary policy
TOPIX Scenario Analysis                                                                                                                                          ☑ (3) Strong US-JP relationship (new)
Scenarios                  2013              TOPIX                  Target                                               Implied
                                                                                                                                          Expectation            ☑ (4) Global mild recovery
2013                     Assigned           Dec 2013E             Trailing PE            Price Target                 Return Upside
Outlook                   Weight              EPS                Assumptions              (Dec 2013)                   (Dec 2013)
                                                                                                                                                                  (5) ROIC over sales growth
Bull Scenario               20%
                                                 85
                                                                       20.0                       1700                       48%                                 ☑ (6) Monetary base 2x from 07
                                               (+82%)
                                                                                                                                                                  (7) Initial signs of mild inflation
Base                                            70
Scenario
                            60%
                                              (+50%)
                                                                       18.0                       1260                       10%
                                                                                                                                          Realization             (8) Clear trough out in leverage

                                                                                                                                                                  (9) From exports to domestics
Bear                                            55
                            20%                                        16.0                       880                       -23%
Scenario                                      (+18%)
                                                                                                                                          Confirmation            (10) Higher GDP and wages
Scenario
Weighted                                                                                          1270                       11%          Source: Morgan Stanley Research.
Average

Source: RIMES, MSCI, Morgan Stanley Research. Data as of April, 11, 2013                                                                  Near term, our tactical concerns are in the following areas:
                                                                                                                                          1) absolute and relative valuation deterioration; 2) the recent
                                                                                                                                          catch-up in consensus earnings expectations to our own
Exhibit 2
                                                                                                                                          forecast; 3) yen / dollar having reached our Q2 target of 100;
MS TOPIX Target Price versus History
                                                                                                                                          4) the lack of further near-term catalysts for the market coupled
1300                                        TOPIX                      TOPIX Target Price                                                 with the importance of progress on micro structural reforms this
                                                                                                                                          summer; 5) Topix is more than 3 SDs overbought on a 200-day
1200
                                                                                                                                          moving average basis (the most in 20 years); and 6) average
1100                                                                                                                                      bottom-up upside to Target Price for Morgan Stanley
1000
                                                                                                                                          analyst-covered top 50 large cap Topix index constituents is
                                                          TOPIX Coverage Initiation                                                       now -6%.
 900


 800                                                                                                                                      Meanwhile, the risk reward equation is improving elsewhere in
                                                                                                                                          our coverage universe (most notably in Non-Japan Asia and
 700
                                                                                                                                          EM). The scenario-weighted upside to Target Price for APxJ
 600                                                                                                                                      and EM is now 8% above that of Topix (see Exhibit 4). Key
                          May-11




                                                     Nov-11




                                                                                May-12




                                                                                                             Nov-12
       Jan-11

                Mar-11




                                   Jul-11


                                            Sep-11




                                                              Jan-12


                                                                       Mar-12




                                                                                         Jul-12


                                                                                                    Sep-12




                                                                                                                        Jan-13

                                                                                                                                 Mar-13




                                                                                                                                          large market OW countries from this universe in our quant
                                                                                                                                          model are Australia, China and Russia. For now, we continue
Source: RIMES, MSCI, Morgan Stanley Research. Data as of April, 11, 2013                                                                  to prefer Asia ex Japan and Japan within global equities.

We remain strategic buyers of Japan equities post the recent
BoJ meeting, at which monetary policy measures exceeded
our (bullish) expectations. (For details see Morgan Stanley
economist Takeshi Yamaguchi’s report BoJ Watch: Regime



                                                                                                                                                                                                              2
                                                                                                                                                                                                   MORGAN                                  STANLEY                                          RESEARCH

                                                                                                                                                                                                   April 15, 2013
                                                                                                                                                                                                   Asia/GEMs Equity Strategy




Exhibit 4                                                                                                                                                                                          Exhibit 6
MS Scenario-weighted Target Price upside with Bull                                                                                                                                                 TOPIX CAPE* P/E – highest since September 2008
and Bear case scenarios
                                                                                                                                                                                                    100x
                                                                                                           Upside to Downside to
                                                                                               Upside to     Bull       Bear                                                                          90x
Equity Market                                                                                 Price Target Scenario   Scenario
                                                                                                                                                                                                      80x
MSCI APxJ (China, Australia, India)                                                               19%        52%        -32%
EM (MSCI)                                                                                         19%        53%        -31%
                                                                                                                                                                                                      70x
Japan (Topix)*                                                                                    11%        48%        -23%
Europe (MSCI)*                                                                                     7%        36%        -29%
                                                                                                                                                                                                      60x
US (S&P 500)                                                                                       0%        22%        -21%
Source: MSCI, RIMES, Morgan Stanley Research. * Local currency returns, Data as of April                                                                                                              50x
11, 2013
                                                                                                                                                                                                      40x

                                                                                                                                                                                                      30x

Tactical Issue #1: Absolute and relative valuation                                                                                                                                                    20x
deterioration                                                                                                                                                                                         10x




                                                                                                                                                                                                              1984

                                                                                                                                                                                                                              1986

                                                                                                                                                                                                                                          1988

                                                                                                                                                                                                                                                      1990

                                                                                                                                                                                                                                                                      1992

                                                                                                                                                                                                                                                                                  1994

                                                                                                                                                                                                                                                                                              1996

                                                                                                                                                                                                                                                                                                              1998

                                                                                                                                                                                                                                                                                                                          2000

                                                                                                                                                                                                                                                                                                                                       2002

                                                                                                                                                                                                                                                                                                                                                       2004

                                                                                                                                                                                                                                                                                                                                                                  2006

                                                                                                                                                                                                                                                                                                                                                                               2008

                                                                                                                                                                                                                                                                                                                                                                                               2010

                                                                                                                                                                                                                                                                                                                                                                                                          2012
Topix absolute P/B has re-rated from a trough of 0.88x last
October to 1.32x currently. This has taken absolute valuations
                                                                                                                                                                                                   Source: Bloomberg, RIMES, Morgan Stanley Research. Data as of April 11, 2013. * CAPE P/E
back to levels last seen in late 2007, pre-crisis, albeit still well                                                                                                                               is computed using the real price and 10-year average real EPS
below the 20-year average of 1.66x.

Exhibit 5
                                                                                                                                                                                                   Topix relative P/B to DM equities has traded up to 0.68x from a
TOPIX Historical Trailing P/Book – highest since late                                                                                                                                              trough of 0.51x. This is above the 20-year average valuation to
2007                                                                                                                                                                                               DM for the first time since 2008.
 3.0x
                                                                                                                                                                                                   Exhibit 7
                                                                                                                                                                                                   TOPIX Trailing P/Book Relative to MSCI World DM –
 2.5x
                                                                                                                                                                                                   back to 20-year average
 2.0x
                                                                                                                                                                                                    1.1x
                                                                                                                                               Average

 1.5x                                                                                                                                                                                               1.0x
                                                                                                                                                                                            1.32
                                                                                                                                                                                                    0.9x
 1.0x

                                                                                                                                                                                                    0.8x
 0.5x
                                                                                                                                                                                                                                                             Average                                                                                                                                               0.68x
                                                                                                                                                                                                    0.7x
 0.0x
        Jul-93
                 Jul-94
                          Jul-95
                                   Jul-96
                                            Jul-97
                                                     Jul-98
                                                              Jul-99
                                                                       Jul-00
                                                                                Jul-01
                                                                                         Jul-02
                                                                                                  Jul-03
                                                                                                           Jul-04
                                                                                                                    Jul-05
                                                                                                                             Jul-06
                                                                                                                                      Jul-07
                                                                                                                                               Jul-08
                                                                                                                                                        Jul-09
                                                                                                                                                                 Jul-10
                                                                                                                                                                          Jul-11
                                                                                                                                                                                   Jul-12




                                                                                                                                                                                                    0.6x


                                                                                                                                                                                                    0.5x
Source: MSCI, RIMES, Morgan Stanley Research, Data as of April 11, 2013

                                                                                                                                                                                                    0.4x
                                                                                                                                                                                                           Jul-93
                                                                                                                                                                                                                     Jul-94
                                                                                                                                                                                                                                 Jul-95
                                                                                                                                                                                                                                          Jul-96
                                                                                                                                                                                                                                                   Jul-97
                                                                                                                                                                                                                                                             Jul-98
                                                                                                                                                                                                                                                                         Jul-99
                                                                                                                                                                                                                                                                                  Jul-00
                                                                                                                                                                                                                                                                                           Jul-01
                                                                                                                                                                                                                                                                                                     Jul-02
                                                                                                                                                                                                                                                                                                                 Jul-03
                                                                                                                                                                                                                                                                                                                          Jul-04
                                                                                                                                                                                                                                                                                                                                   Jul-05
                                                                                                                                                                                                                                                                                                                                              Jul-06
                                                                                                                                                                                                                                                                                                                                                         Jul-07
                                                                                                                                                                                                                                                                                                                                                                  Jul-08
                                                                                                                                                                                                                                                                                                                                                                           Jul-09
                                                                                                                                                                                                                                                                                                                                                                                      Jul-10
                                                                                                                                                                                                                                                                                                                                                                                                 Jul-11
                                                                                                                                                                                                                                                                                                                                                                                                          Jul-12




Topix CAPE (cyclically adjusted P/E) has traded up to 21.3x
from a trough of 14.1x in May-2012. This is the highest since
September 2008 (see Exhibit 6).                                                                                                                                                                    Source: MSCI, RIMES, Morgan Stanley Research, Data as of April 11, 2013




                                                                                                                                                                                                   Likewise, the relative P/B of Topix to MSCI EM has traded up to
                                                                                                                                                                                                   0.86x from a trough of 0.58x. This is the highest P/B relative
                                                                                                                                                                                                   versus MSCI EM since the 2002-2004 period.




                                                                                                                                                                                                                                                                                                                                                                                                                           3
                                                                                                                                                                                                                                                                            MORGAN                                               STANLEY           RESEARCH

                                                                                                                                                                                                                                                                            April 15, 2013
                                                                                                                                                                                                                                                                            Asia/GEMs Equity Strategy




Exhibit 8                                                                                                                                                                                                                                                                   As shown in Exhibit 10, year to date performance in global
TOPIX Trailing P/Book Relative to MSCI EM –                                                                                                                                                                                                                                 equities has been heavily influenced by FY2 earnings revisions
highest since 2002-2004                                                                                                                                                                                                                                                     (R squared is 40%). Note as an aside, though, how much the
                                                                                                                                                                                                                                                                            S&P 500 has outperformed China, even though China has had
 1.8x                                                                                                                                                                                                                                                                       somewhat better earnings revisions performance than the S&P
                                                                                                                                                                                                                                                                            this year. This has, of course, driven a relative de-rating of
 1.6x
                                                                                                                                                                                                                                                                            China and other large EM markets versus both the S&P
 1.4x
                                                                                                                                                                                                                                                                            and Japan.
 1.2x
                                                                                                                                                                                                                                                                            Exhibit 10
 1.0x                                                                                                                                                                                   Average
                                                                                                                                                                                                                                                                    0.86x   YTD Performance vs. FY2 Earnings Revisions
 0.8x
                                                                                                                                                                                                                                                                            Factor (3MMA)
 0.6x
                                                                                                                                                                                                                                                                                                                   20.0%
 0.4x                                                                                                                                                                                                                                                                                                                                                                                         Philippines
                                                                                                                                                                                                                                                                                                                                                                                                            TOPIX
                                                                                                                                                                                                                                                                                                                   15.0%




                                                                                                                                                                                                                                                                              YTD Total Return Performance (US$)
 0.2x
                                                                                                                                                                                                                                                                                                                                                                                S&P 500    Indonesia
                                                                                                                                                                                                                                                                                                                                                                               Australia
 0.0x                                                                                                                                                                                                                                                                                                              10.0%                                                Mexico             Thailand
          Jul-93
                            Jul-94
                                        Jul-95
                                                   Jul-96
                                                               Jul-97
                                                                             Jul-98
                                                                                          Jul-99
                                                                                                    Jul-00
                                                                                                                Jul-01
                                                                                                                              Jul-02
                                                                                                                                           Jul-03
                                                                                                                                                      Jul-04
                                                                                                                                                                 Jul-05
                                                                                                                                                                               Jul-06
                                                                                                                                                                                            Jul-07
                                                                                                                                                                                                       Jul-08
                                                                                                                                                                                                                   Jul-09
                                                                                                                                                                                                                                Jul-10
                                                                                                                                                                                                                                              Jul-11
                                                                                                                                                                                                                                                         Jul-12




                                                                                                                                                                                                                                                                                                                                                                         Turkey
                                                                                                                                                                                                                                                                                                                                                                   MSCI Europe
                                                                                                                                                                                                                                                                                                                    5.0%
                                                                                                                                                                                                                                                                                                                                                 Malaysia                       Singapore    Hong Kong
                                                                                                                                                                                                                                                                                                                                                                       Chile
                                                                                                                                                                                                                                                                                                                                                Hungary                          MSCI APxJ
                                                                                                                                                                                                                                                                                                                    0.0%                                                       Brazil
Source: MSCI, RIMES, Morgan Stanley Research, Data as of April 11, 2013                                                                                                                                                                                                                                                                                                                 Taiwan
                                                                                                                                                                                                                                                                                                                                                                               MSCI EM
                                                                                                                                                                                                                                                                                                                                                                    India
                                                                                                                                                                                                                                                                                                                    -5.0%                                                        Russia
                                                                                                                                                                                                                                                                                                                                                          Poland     Colombia      China
                                                                                                                                                                                                                                                                                                                                   Peru                S. Africa        Korea

                                                                                                                                                                                                                                                                                                                   -10.0%                                     Egypt
Tactical Issue #2 – Consensus earnings
expectations have moved up towards our number                                                                                                                                                                                                                                                                      -15.0%            Czech


and expects ROE to surge – companies now have                                                                                                                                                                                                                                                                      -20.0%
to deliver                                                                                                                                                                                                                                                                                                              -20.0%    -15.0%      -10.0%         -5.0%               0.0%           5.0%         10.0%
                                                                                                                                                                                                                                                                                                                                           FY2 Earnings Revisions Factor, 3MMA
Consensus earnings expectations for Topix have been revised
up significantly in recent weeks (see Exhibit 9). Consensus                                                                                                                                                                                                                 Source: IBES, MSCI, RIMES, Morgan Stanley Research. Data as of April 11, 2013

now expects yen 67 (+45% EPS growth) this year, versus our
top down estimate of yen 70 (+50%). Our bull case is yen 85.                                                                                                                                                                                                                Based on our own top-down forecasts for 2013 EPS, Topix is
                                                                                                                                                                                                                                                                            trading on 16.4x forward P/E versus 10.3x for EM, 11.8x for
Exhibit 9                                                                                                                                                                                                                                                                   APxJ, 12.8x for Europe and 15.4x for the US.
TOPIX Consensus EPS Expectation (FY1988-2014)
                                                                                                                                                                                                                                                                            Exhibit 11
120                                                                                                                                                                                                                                                                         MS 2013 EPS Growth versus Consensus with 2013
100                                                                                                                                                                                                                                                                         P/E multiples – Japan has re-rated
 80
                                                                                                                                                                                                                                                                                                                                      MS Top Down                           Consensus                   MS Top
 60
                                                                                                                                                                                                                                                                                                                                       2013E EPS                            2013E EPS                    Down
 40                                                                                                                                                                                                                                                                         Regions                                                     Growth                               Growth                    2013E PE
 20
                                                                                                                                                                                                                                                                            APxJ (MSCI)                                                   14%                                  13%                       11.8x
                                                                                                                                                                                                                                                                            *Japan (Topix)                                                50%                                  45%                       16.4x
   0                                                                                                                                                                                                                                                                        EM (MSCI)                                                     14%                                  15%                       10.3x
 -20                                                                                                                                                                                                                                                                        *Europe (MSCI)                                                5%                                    7%                       12.8x
                                                                                                                                                                                                                                                                            US (S& P 500)                                                 0%                                    7%                       15.4x
 -40
       Jan-88
                   Jan-89
                               Jan-90
                                         Jan-91
                                                  Jan-92
                                                            Jan-93
                                                                        Jan-94
                                                                                 Jan-95
                                                                                           Jan-96
                                                                                                    Jan-97
                                                                                                             Jan-98
                                                                                                                         Jan-99
                                                                                                                                  Jan-00
                                                                                                                                             Jan-01
                                                                                                                                                      Jan-02
                                                                                                                                                               Jan-03
                                                                                                                                                                          Jan-04
                                                                                                                                                                                   Jan-05
                                                                                                                                                                                              Jan-06
                                                                                                                                                                                                       Jan-07
                                                                                                                                                                                                                 Jan-08
                                                                                                                                                                                                                            Jan-09
                                                                                                                                                                                                                                     Jan-10
                                                                                                                                                                                                                                                Jan-11
                                                                                                                                                                                                                                                         Jan-12
                                                                                                                                                                                                                                                                  Jan-13




                                                                                                                                                                                                                                                                            Source: MSCI, IBES, RIMES, Morgan Stanley Research. Data as of April 11, 2013

                                     1988                            1989                              1990                                1991                            1992                                 1993                             1994
                                     1995                            1996                              1997                                1998                            1999                                 2000                             2001
                                     2002                            2003                              2004                                2005                            2006                                 2007                             2008
                                     2009                            2010                              2011                                2012E                           2013E                                2014E


Source: RIMES, IBES, Morgan Stanley Research




                                                                                                                                                                                                                                                                                                                                                                                                                     4
                                                                                                                                                                                                                             MORGAN                               STANLEY                                            RESEARCH

                                                                                                                                                                                                                             April 15, 2013
                                                                                                                                                                                                                             Asia/GEMs Equity Strategy




Exhibit 12 shows our forecast EPS trajectories for MSCI EM,                                                                                                                                                                  global equity benchmarks currently. Moreover, this analysis
Topix and MXAPJ.                                                                                                                                                                                                             uses historical data for corporate performance in weaker yen
                                                                                                                                                                                                                             episodes. There are considerable question marks over
Exhibit 12                                                                                                                                                                                                                   whether corporate Japan’s recent restructuring (to cope with a
EPS Trajectory for APxJ, EM and Topix                                                                                                                                                                                        strong yen environment in the past five years) leaves it as
                                                                                                                                                                                                   Base Case                 positively exposed to yen weakness as the regressions
  700                                                                                                                                                                                              Forecast 2013
                                                                                                                                                                                                                             indicate it has been in the past. Corporate earnings delivery in
                                                                                                                                                                                                                      $100
  600                                                                                                                                                                                                                        the upcoming earnings seasons will be crucial.
  500
                                                                                                                                                                                                                      $40    Exhibit 14
  400                                                                                                                                                                                                                        MSCI Japan Trailing ROE with MS Top-Down Bull,
  300                                                                                                                                                                                                                        Base and Bear Case Projections
  200
                                                                                                                                                                                                                      ¥70     12%
                                                                                                                                                                                                                                                                                                                                                                                                                            2013E
  100
                                                                                                                                                                                                                                                                    MSCI Japan
                                                                                                                                                                                                                              10%                                                                                                                                                                                         Bull, 9.5%
       0
                                                                       MSCI EM                                       TOPIX                                   MSCI APxJ
 -100                                                                                                                                                                                                                                                                                                                                                                                                                     Base, 8.0%
                                                                                                                                                                                                                               8%
           Jan-92
                     Jan-93
                              Jan-94
                                       Jan-95
                                                Jan-96
                                                         Jan-97
                                                                  Jan-98
                                                                           Jan-99
                                                                                    Jan-00
                                                                                              Jan-01
                                                                                                       Jan-02
                                                                                                                Jan-03
                                                                                                                         Jan-04
                                                                                                                                  Jan-05
                                                                                                                                           Jan-06
                                                                                                                                                    Jan-07
                                                                                                                                                              Jan-08
                                                                                                                                                                       Jan-09
                                                                                                                                                                                Jan-10
                                                                                                                                                                                          Jan-11
                                                                                                                                                                                                    Jan-12
                                                                                                                                                                                                             Jan-13




                                                                                                                                                                                                                                                                                                                                                                                                                        Bear, 6.3%
                                                                                                                                                                                                                               6%                                                                                                                                                                                                     6.0%

Source: MSCI, RIMES, Morgan Stanley Research
                                                                                                                                                                                                                               4%


                                                                                                                                                                                                                               2%
Topix is now trading above the line of best fit in consensus
ROE to P/B for 2013, indicating that the market is pricing in
                                                                                                                                                                                                                               0%
optimism for further positive EPS revisions. Korea (MS EW)
                                                                                                                                                                                                                                    Jan-92
                                                                                                                                                                                                                                             Jan-93
                                                                                                                                                                                                                                                      Jan-94
                                                                                                                                                                                                                                                               Jan-95
                                                                                                                                                                                                                                                                        Jan-96
                                                                                                                                                                                                                                                                                 Jan-97
                                                                                                                                                                                                                                                                                          Jan-98
                                                                                                                                                                                                                                                                                                   Jan-99
                                                                                                                                                                                                                                                                                                            Jan-00
                                                                                                                                                                                                                                                                                                                     Jan-01
                                                                                                                                                                                                                                                                                                                              Jan-02
                                                                                                                                                                                                                                                                                                                                       Jan-03
                                                                                                                                                                                                                                                                                                                                                Jan-04
                                                                                                                                                                                                                                                                                                                                                         Jan-05
                                                                                                                                                                                                                                                                                                                                                                  Jan-06
                                                                                                                                                                                                                                                                                                                                                                           Jan-07
                                                                                                                                                                                                                                                                                                                                                                                    Jan-08
                                                                                                                                                                                                                                                                                                                                                                                             Jan-09
                                                                                                                                                                                                                                                                                                                                                                                                      Jan-10
                                                                                                                                                                                                                                                                                                                                                                                                               Jan-11
                                                                                                                                                                                                                                                                                                                                                                                                                        Jan-12
                                                                                                                                                                                                                                                                                                                                                                                                                                 Jan-13
has, in contrast, de-rated to trade at a 20% discount to Topix,
embedding a high expectation of downward earnings revisions.
                                                                                                                                                                                                                             Source: MSCI, RIMES, Morgan Stanley Research, Monthly data as of March 31, 2013

Exhibit 13
2013 Consensus P/B versus ROE – Topix now above
the line of best fit                                                                                                                                                                                                         Tactical Issue #3 – Yen / dollar has reached our FX
                                                                                                                                                                                                                             team’s near-term forecast
3.0x
           2013E Price/ Book                                                                                                                                                              Mexico
                                                                                                                                                                                                                             Our third tactical concern is that the yen / dollar exchange rate
2.5x
                                                                                                                                                                                                                             has traded up to our target for Q2 of yen 100 and within sight of
                                                                                                                                                                                         S&P 500
                                                                                                                                           Australia                                                         South Africa    our year-end target of 105.
2.0x                                                                                                                                                                                     India

                                                                                       Taiwan                             MSCI APxJ                                                         Turkey
1.5x
                                                                                                                                                                                                                             Currently, there is a divergence in market positioning. On the
                                                                                               MSCI Europe
                                                                                         Brazil
                                                                                New Zealand
                                                                                                         MSCI EM                                                          China                                              one hand, fast money investors, namely those offshore,
                    TOPIX
1.0x
                                                                                                                             Korea
                                                                                                                                                                                                                             already hold substantial yen shorts; on the other, domestic
                                                                                                                                                                                                                             Japanese investors have yet to adjust their portfolios to a
                                                                                                                                           Russia
0.5x                                                                                                                                                                                                                         weakening yen environment. While we are now in the new
                                                                                                                                                                                                     2013E ROE               Japanese fiscal year and expect an eventual reduction on
0.0x
       7%                     8%                9%                  10%                      11%                12%                 13%                      14%                15%                    16%            17%
                                                                                                                                                                                                                             foreign investment FX hedge ratios, history suggests that real
                                                                                                                                                                                                                             money investors tend to take time to decide on their new
Source: RIMES, MSCI, IBES, Morgan Stanley Research. Data as of April 11, 2013
                                                                                                                                                                                                                             investment allocations. Thus, in the next few weeks, there is
                                                                                                                                                                                                                             the potential for a short squeeze as fast money investors book
                                                                                                                                                                                                                             profits ahead of technical resistance. Given the correlation
At 105 yen / dollar, we continue to believe that Topix can
                                                                                                                                                                                                                             between dollar / yen and Japanese equities, a stalling in the
generate 8%+ ROE this year – the best since 2005/2006.
                                                                                                                                                                                                                             former is likely to weigh on the latter.
However, the yen would need to weaken to closer to 120 yen /
dollar to generate a 12%+ ROE comparable with other major



                                                                                                                                                                                                                                                                                                                                                                                                                                             5
                                                                                                                                                                                                                      MORGAN             STANLEY           RESEARCH

                                                                                                                                                                                                                      April 15, 2013
                                                                                                                                                                                                                      Asia/GEMs Equity Strategy




Looking ahead, while we expect structural yen weakness over                                                                                                                                                           over the coming quarters. With these actions in monetary and
a multi-year time frame, it is also notable that the pace of future                                                                                                                                                   fiscal policy now taken, their impact on the market is now
yen declines in our forecasts is expected to be much milder                                                                                                                                                           largely discounted.
than that witnessed over the past few months
                                                                                                                                                                                                                      Importance of Third Arrow (microeconomic) reforms
Exhibit 15
FX rate dollar / yen has reached our FX team’s near-                                                                                                                                                                  Further impact on the macro outlook from policy must come
term forecast level                                                                                                                                                                                                   largely from “Third Arrow” (microeconomic reform) policies,
                                                                                                                                                                                                                      which involve many more decision makers, require much more
 160
                                                                                                                                                                                                                      coordination, and which often take much more time to
 150                                                                                                                USD / JPY                                                                                         implement and impact the economy. Indeed, on our recent
                                                                                                                    MS FX team Forecast
 140                                                                                                                                                                                                                  travels to Asia-Pacific and in speaking to clients in Japan, the
 130                                                                                                                                                                                                     Forecast     most frequently raised question is about the progress of Third
 120                                                                                                                                                                                                                  Arrow policies.
 110
                                                                                                                                                                                                                      The process has only begun, and it will take a long time for
 100
                                                                                                                                                                                                                      hopes to be realized. That said, it is helpful to look at progress
  90
                                                                                                                                                                                                                      so far and gauge performance (see Exhibit 16). The Third
  80
                                                                                                                                                                                                                      Arrow effort has done well in agriculture, energy, and
  70                                                                                                                                                                                                                  employment. However, performance in medical care,
  60                                                                                                                                                                                                                  education, and government reform is inadequate. The process
       Jan-92
                Jan-93
                         Jan-94
                                  Jan-95
                                           Jan-96
                                                    Jan-97
                                                             Jan-98
                                                                      Jan-99
                                                                               Jan-00
                                                                                        Jan-01
                                                                                                 Jan-02
                                                                                                          Jan-03
                                                                                                                   Jan-04
                                                                                                                            Jan-05
                                                                                                                                     Jan-06
                                                                                                                                              Jan-07
                                                                                                                                                       Jan-08
                                                                                                                                                                Jan-09
                                                                                                                                                                         Jan-10
                                                                                                                                                                                  Jan-11
                                                                                                                                                                                           Jan-12
                                                                                                                                                                                                    Jan-13
                                                                                                                                                                                                             Jan-14




                                                                                                                                                                                                                      has “incomplete” grades in several key areas as well. And,
                                                                                                                                                                                                                      unfortunately, efforts in electoral reform receive a failing grade,
Source: RIMES, Morgan Stanley Research, Data as of April 11, 2013                                                                                                                                                     due to no impact of proposals on the underlying problem.

                                                                                                                                                                                                                      Exhibit 16
Tactical Issue #4 – Lack of further near-term policy                                                                                                                                                                  Third Arrow Report Card
catalysts for the market / importance of structural                                                                                                                                                                        Topic          Grade So Far                     Content of Policies
micro reforms in the summer and bond market
                                                                                                                                                                                                                                                  B            Good so far, but important issues are yet
stability                                                                                                                                                                                                             Agriculture                              unaddressed.

                                                                                                                                                                                                                                                  C            Moves so far obvious; no clear change of
The fourth issue of concern is the lack of further near-term                                                                                                                                                          Medical Care                             medical system or incentives.
policy catalysts for the market. The stock market axiom “it is                                                                                                                                                                                   B+
                                                                                                                                                                                                                                                               Good moves to change R&D; budget
                                                                                                                                                                                                                      Energy                                   commitment still too low.
better to travel than to arrive” is not without foundation. In our
                                                                                                                                                                                                                                                  B-           Bold to float ideas on hiring/firing, but no action
framework for Japan, we have emphasized in recent months                                                                                                                                                              Employment                               taken yet.
                                                                                                                                                                                                                                                               Plans are transparently cosmetic; no impact on
that valuation multiple expansion would likely be front-end                                                                                                                                                           Electoral System
                                                                                                                                                                                                                                                  F
                                                                                                                                                                                                                                                               underlying problem.
loaded in the expectations phase of a journey – hopefully –                                                                                                                                                                                                    Good ideas, but small relative to needs; budget
                                                                                                                                                                                                                                                  C
towards successful reflation. We are now entering the middle                                                                                                                                                          Education                                implications not clarified.
                                                                                                                                                                                                                                             Incomplete
part of that journey, which will be both longer in duration and                                                                                                                                                       Tax System                               Debate has yet to begin in earnest.

more prone to setbacks, and where, from an equity market                                                                                                                                                              Government                               My Number is excellent step, rest of agenda is
                                                                                                                                                                                                                                                 C+
                                                                                                                                                                                                                      Reform                                   murky and stalled.
perspective, earnings delivery will be crucial.                                                                                                                                                                       Immigration            Incomplete        Debate has yet to begin in earnest.

                                                                                                                                                                                                                      Source: “J-Insight; The Third Arrow: Can Abenomics Maintain Momentum?”, by Robert Alan
While we remain bullish on the policy outlook, we also believe                                                                                                                                                        Feldman, Morgan Stanley, April 4, 2013. * For details on the third arrow policies, see,
                                                                                                                                                                                                                      “J-Insight; The Third Arrow: Can Abenomics Maintain Momentum?”, by Robert Alan Feldman,
that all of the “easy stuff” has been done. True, BoJ Governor                                                                                                                                                        Morgan Stanley, April 4, 2013
Kuroda’s recent monetary policy changes were indeed
breath-taking. The road to decision was blocked for years by
BoJ foot-dragging. However, once decided, implementation of                                                                                                                                                           For investors, the Third Arrow policies are at once the most
new monetary policies was immediate, and so was the impact.                                                                                                                                                           exciting and the most frustrating. The potential for huge new
Likewise for fiscal spending policies. Spending money is easy,                                                                                                                                                        business opportunities is evident, but the likelihood of
especially when you can borrow at 0.5% for ten years. The                                                                                                                                                             achieving large-enough change in a short-enough horizon
recent supplementary budget package was proposed and                                                                                                                                                                  remains low in most areas. Thus, maintaining market
passed rather quickly, and is set to support GDP by about 1%                                                                                                                                                          momentum will likely prove difficult. The heavy lifting in policy



                                                                                                                                                                                                                                                                                                                     6
                                                                        MORGAN                            STANLEY                                       RESEARCH

                                                                        April 15, 2013
                                                                        Asia/GEMs Equity Strategy




starts now, and investors will have to adjust to the end of the         50-day moving average of 1,021 and 37% above its 200-day
easy stuff.                                                             moving average of 833 (as of April 11, 2013’s closing).
Importance of bond market stability                                     Exhibit 17

It is also important, in our view, that the Japan government            TOPIX Price Relative to 200-Day Moving Average –
bond market, which is simultaneously coping with a wrenching            More than 3 SDs overbought, the most in 20 years
change in a) increased BoJ purchase intentions and b) rising
                                                                         50%
inflation expectations, remains stable. Bond market volatility
has picked up noticeably since the BoJ announcement.                     40%                                                                                                                                                                                        37.4%
                                                                                                                   31.8%
                                                                                        +3 S.D
                                                                         30%
                                                                                        +2 S.D                     21.0%
The magnitude of surprise from the BoJ was difficult for the             20%
bond market to digest. In the near term, we expect volatility            10%            +1 S.D
                                                                                                               10.2%

continues to remain high. Volatility might also be                        0%                                                          Average
self-reinforced, as it often undermines dealers risk-taking
                                                                        -10%
capability, especially given the large size of each bond-buying                     -1 S.D            -11.5%
                                                                        -20%
operation, real-money investors will likely become the                              -2 S.D            -22.3%
                                                                        -30%
dominant participants in such operations.                                           -3 S.D           -33.1%
                                                                        -40%
In the long run, the BoJ’s policy action will also, in our view,
                                                                        -50%
lead to higher volatility of the very back end of the curve. The
                                                                               Jul-93
                                                                                        Jul-94
                                                                                                 Jul-95
                                                                                                          Jul-96
                                                                                                                    Jul-97
                                                                                                                             Jul-98
                                                                                                                                      Jul-99
                                                                                                                                               Jul-00
                                                                                                                                                        Jul-01
                                                                                                                                                                 Jul-02
                                                                                                                                                                          Jul-03
                                                                                                                                                                                   Jul-04
                                                                                                                                                                                            Jul-05
                                                                                                                                                                                                     Jul-06
                                                                                                                                                                                                              Jul-07
                                                                                                                                                                                                                       Jul-08
                                                                                                                                                                                                                                Jul-09
                                                                                                                                                                                                                                         Jul-10
                                                                                                                                                                                                                                                  Jul-11
                                                                                                                                                                                                                                                           Jul-12
BoJ is set to lengthen the average residual maturity of its
holdings to around seven years in line with the JGB market
                                                                        Source: RIMES, Morgan Stanley Research, Data as of April 11, 2013
average. This lengthening, however, is to be achieved by a
disproportionately large (bullet-type) allocation to bonds with
ten years or shorter to maturities. While the maturity allocation       From a strategic viewpoint, our data suggests that the UW
will likely create a huge shortage of JGB in this sector (15-20%        Japan position in global funds has now started to close but
of outstanding amount would be taken out of the market within           remains substantial. This will support the market on any dip, we
a year) and ensure sub-10yr yields stay relatively low for a            believe.
considerable period of time, it does not provide direct support
to the further end of the curve. Looking ahead, the 10yr+ sector
would have to cope with two opposite forces: 1) Downward                Tactical Issue #6 – Bottom-up Target Price upside
pressure from duration extension by investors, due to the lack
of yields in the front-end, and 2) upward pressure from higher          Finally, we highlight that from a bottom-up perspective many of
inflation expectations. These drivers are highly unpredictable          the largest capitalization stocks in Japan are trading above our
and would likely lead to higher volatility on this part of the curve.   analysts’ current price targets (see Exhibit 21). The average
                                                                        downside to price target is 6% currently. That said, we should
                                                                        point out that the FX assumptions currently used by Morgan
Tactical Issue #5 – Topix is 3 SDs overbought on a                      Stanley analysts bottom-up do deviate from the house’s top-
200-day moving average basis (most in 20 years)                         down forecast and are typically currently in the yen 90-95
                                                                        range for the average year, whilst company guidance is
Our fifth tactical issue is the most straightforward, but not           somewhat lower still. This does allow some potential for upside
without importance. Topix is now more than 3 SDs overbought             revision. (For full details on this issue see Morgan Stanley
on a 200-day moving average basis. This is the most                     Japan Research report Japan Forex Master: Forex-Profit
overbought the market has been in at least 20 years (and ever,          Sensitivity Sheet Spring 2013, dated April 4, 2013.)
our tentative calculations suggest). The sudden explosive
move in the market is of course testament to the extent of the
upside surprise to sentiment from Abenomics and now the
BoJ’s actions, but also the extent of the structural UW Japan
equities in both global and domestic portfolios. However, the
degree to which the market is overbought leaves it vulnerable
technically to a pullback. The current price is 12% above its




                                                                                                                                                                                                                                                                            7
                                                                                                                                MORGAN                  STANLEY                        RESEARCH

                                                                                                                                April 15, 2013
                                                                                                                                Asia/GEMs Equity Strategy




Exhibit 18                                                                                                                      Exhibit 19
Deviation of MSCI Japan sector indices trailing P/B                                                                             2013E MSCI Japan Sector P/Book vs. ROE Scatter
multiples from their own 10-year averages
                                                                                                                                2.0x    2013E P/Book
                                                                                                                                                                                                                                                  Health Care
   30%                                                                                                                                                                                                                                                   Cons. Stap.
                                                                                                                                1.8x
   20%
   10%                                                                                                                          1.6x

    0%
                                                                                                                                1.4x                                                                                                               Cons. Disc.
  -10%                                                                                                                                                                                                                                  IT
                                                                                                                                                                                                                                              MSCI Japan Telecom
                                                                                                                                                                                                                                                   Industrials
  -20%                                                                                                                          1.2x
                                                                                                                                                                                                                                        Financials
  -30%                                                                                                                                                                                                                                Materials

  -40%                                                                                                                          1.0x
                                                                                                                                                      Utilities
             Energy




                                                                                      Telecomm
                                                                              Japan




                                                                                                 Health




                                                                                                                      Staples
                      Utilities


                                  Materials




                                                   Financials




                                                                                                          Cons Disc
                                                                Industrials

                                                                              MSCI
                                              IT




                                                                                                  Care




                                                                                                                       Cons     0.8x
                                                                                                                                                                                                                                             Energy
                                                                                                                                                                                                                                                          2013E ROE
                                                                                                                                0.6x
                                                                                                                                   -4.0%         -2.0%        0.0%         2.0%                     4.0%                 6.0%            8.0%         10.0%           12.0%
Source: MSCI, RIMES, Morgan Stanley Research, Data as of April 11, 2013

                                                                                                                                Source: MSCI, RIMES, IBES, Morgan Stanley Research. Data as of April 11, 2013


Exhibit 18 provides valuation deviations versus 10-year
average P/B by MSCI Japan sector. Exhibit 20 shows price                                                                        Exhibit 20
deviations to 200-day m.a. Our preferred sectors currently                                                                      Deviation of MSCI Japan sector indices price from
remain yen weakness beneficiaries and domestic asset price                                                                      their 200-day m.a. (in LOC) – two of our three
reflation names in Financials, Consumer Discretionary and                                                                       preferred sectors are the most overbought
Industrials. That said, it is noteworthy that Consumer
Discretionary and Financials are the two most technically                                                                         60%

overbought sectors in the market currently, while Consumer                                                                        50%
Discretionary – which includes the key auto names – is already                                                                    40%
trading back above its 10-year average P/B. Industrials and
                                                                                                                                  30%
Financials are around 10% below.
                                                                                                                                  20%

                                                                                                                                  10%

                                                                                                                                   0%
                                                                                                                                             Energy




                                                                                                                                                                                                                           Telecomm
                                                                                                                                                                           Materials


                                                                                                                                                                                        Utilities




                                                                                                                                                                                                                                        Staples




                                                                                                                                                                                                                                                          Cons Disc


                                                                                                                                                                                                                                                                        Financials
                                                                                                                                                                  Health




                                                                                                                                                                                                           Industrials




                                                                                                                                                                                                                                                  Japan
                                                                                                                                                                                                                                                  MSCI
                                                                                                                                                         IT


                                                                                                                                                                   Care




                                                                                                                                                                                                                                         Cons




                                                                                                                                Source: MSCI, RIMES, Morgan Stanley Research, Data as of April 11, 2013




                                                                                                                                                                                                                                                                                     8
                                                                                                      MORGAN             STANLEY              RESEARCH

                                                                                                      April 15, 2013
                                                                                                      Asia/GEMs Equity Strategy




Exhibit 21
MS covered top 50 stocks by market capitalization – current average upside to price target of -6%
  MS           Company name                  GICS Sector            Market     Share     Target      Potentia Stock Price to earnings       Price to book      Return on equity     Dividend Yield
Ticker                                                             capitaliz    price  Price (JPY)   l upside Rating                            value            (ROE) (%)               (%)
   /                                                                 ation      (JPY)                   to
Reuter                                                              (Billion                          target
   s                                                                 USD)
                                                                    Current Current                                    2012CYE   2013CYE   2012CYE   2013CYE   2012CYE   2013CYE   2012CYE   2013CYE
7203.T Toyota Motor                   Consumer Discretionary         177.3    5,640.0    5,850.0        3.7%     OW    13.8x     11.4x     1.5x      1.4x      10.7%     11.9%     2.1%      2.6%
7267.T Honda Motor                    Consumer Discretionary          71.3     3,945.0   4,350.0      10.3%      OW    12.8x     10.9x     1.4x      1.3x      11.1%     11.9%     2.3%      2.7%
2914.T Japan Tobacco                  Consumer Staples                66.6     3,470.0   3,700.0        6.6%     OW    15.7x     14.0x     3.0x      2.7x      19.1%     18.9%     2.5%      3.2%
9437.T NTT DOCOMO                     Telecommunication Services      64.5   155,200.0  130,000.0     -16.2%     EW    12.3x     11.5x     1.2x      1.1x      9.5%      9.6%      3.4%      3.4%
8316.T Sumitomo Mitsui FG             Financials                      63.6     4,695.0   4,750.0        1.2%     OW    10.9x     11.2x     1.0x      0.9x      9.3%      8.4%      2.1%      2.3%
9432.T NTT                            Telecommunication Services      55.4    4,520.0    5,000.0      10.6%      OW    9.2x      8.4x      0.6x      0.6x      6.8%      7.0%      3.9%      4.3%
8411.T Mizuho Financial Group         Financials                      55.3      219.0     200.0        -8.7%     EW    11.6x     11.9x     1.0x      0.9x      8.6%      7.9%      2.7%      2.7%
9984.T Softbank                       Telecommunication Services      53.7    4,765.0    5,200.0        9.1%     OW    12.0x     12.8x     2.9x      2.4x      24.1%     18.9%     1.0%      1.0%
8802.T Mitsubishi Estate              Financials                      44.7     3,210.0   2,400.0      -25.2%     EW    65.8x     59.7x     3.6x      3.4x      5.5%      5.7%      0.4%      0.4%
7201.T Nissan Motor                   Consumer Discretionary          43.8    1,043.0    1,140.0        9.3%     OW    8.9x      7.8x      1.2x      1.1x      13.5%     13.7%     3.2%      3.7%
7751.T Canon                          Information Technology          42.7    3,695.0    3,400.0       -8.0%     EW    19.3x     12.9x     1.6x      1.5x      8.5%      11.8%     3.5%      3.5%
4502.T Takeda Pharmaceutical          Health Care                     41.0     5,180.0   5,700.0      10.0%      OW    24.2x     23.6x     1.6x      1.5x      6.6%      6.3%      3.5%      3.6%
6902.T Denso                          Consumer Discretionary          36.1     4,475.0   4,400.0       -1.7%     OW    17.7x     15.7x     1.6x      1.5x      8.9%      9.3%      1.3%      1.4%
9020.T East Japan Railway             Industrials                     34.9     8,790.0   8,000.0       -9.0%     OW    16.8x     15.3x     1.6x      1.5x      9.8%      10.0%     1.5%      1.6%
9433.T KDDI                           Telecommunication Services      32.3    4,155.0    4,500.0        8.3%     OW    10.4x     9.0x      1.3x      1.2x      12.8%     13.3%     2.7%      3.4%
6954.T Fanuc                          Industrials                     31.0    15,800.0  14,000.0      -11.4%     EW    25.9x     23.0x     2.8x      2.5x      10.7%     11.0%     1.3%      1.3%
8801.T Mitsui Fudosan                 Financials                      30.5     3,460.0   2,400.0      -30.6%     EW    52.1x     50.9x     2.7x      2.6x      5.1%      5.0%      0.6%      0.6%
8058.T Mitsubishi Corp.               Industrials                     30.5     1,846.0   1,950.0        5.6%     EW    7.4x      6.6x      0.7x      0.7x      10.0%     10.4%     3.2%      3.6%
6501.T Hitachi                        Information Technology          29.2      628.0     470.0       -25.2%     EW    13.1x     11.8x     1.4x      1.3x      10.7%     10.8%     1.3%      1.3%
5108.T Bridgestone                    Consumer Discretionary          28.9     3,685.0   3,400.0       -7.7%     OW    16.8x     11.9x     2.1x      1.8x      12.5%     15.4%     0.9%      1.5%
8604.T Nomura Holdings                Financials                      28.3      760.0     780.0         2.6%     OW    18.6x     13.3x     1.2x      1.1x      6.6%      8.5%      0.8%      1.1%
4063.T Shin-Etsu Chemical             Materials                       28.0     6,460.0   5,100.0      -21.1%     EW    23.4x     22.5x     1.8x      1.7x      7.5%      7.4%      1.5%      1.5%
4689.T Yahoo Japan                    Information Technology          27.2    46,850.0  28,000.0      -40.2%     EW    23.7x     21.3x     4.3x      3.7x      18.1%     17.2%     0.8%      0.9%
4503.T Astellas Pharma                Health Care                     25.8    5,570.0    5,800.0        4.1%     OW    21.3x     17.9x     2.3x      2.1x      10.8%     11.9%     2.5%      2.6%
8031.T Mitsui & Co.                   Industrials                     25.4     1,389.0   1,260.0       -9.3%     EW    7.6x      6.9x      0.8x      0.7x      10.7%     10.9%     3.3%      3.7%
8766.T Tokio Marine Holdings          Financials                      24.5     3,185.0   3,200.0        0.5%     EW    20.9x     18.6x     1.1x      1.1x      5.5%      5.8%      1.8%      2.1%
6301.T Komatsu                        Industrials                     24.0     2,516.0   3,000.0       19.2%     OW    12.4x     10.2x     2.0x      1.7x      15.7%     16.7%     2.1%      2.5%
9022.T Central Japan Railway          Industrials                     23.5    11,930.0   8,400.0      -29.6%     UW    11.7x     12.6x     1.4x      1.3x      12.3%     10.4%     0.8%      0.8%
7011.T Mitsubishi Heavy Industries    Industrials                     23.4      696.0     670.0        -3.7%     OW    24.9x     19.5x     1.7x      1.6x      6.8%      8.1%      0.9%      0.9%
8830.T Sumitomo Realty & Dev.         Financials                      23.2     4,885.0   3,200.0      -34.5%     EW    38.3x     37.8x     3.6x      3.3x      9.4%      8.8%      0.4%      0.4%
6502.T Toshiba                        Information Technology          23.0      534.0     550.0         3.0%     OW    13.9x     12.0x     2.0x      1.8x      14.7%     15.0%     1.5%      1.9%
8309.T Sumitomo Mitsui Trust Holdings Financials                      22.0      529.0     520.0        -1.7%     OW    14.5x     13.0x     1.1x      1.0x      7.6%      8.0%      2.1%      2.3%
8591.T Orix                           Financials                      20.1     1,479.0   1,400.0       -5.3%     OW    12.2x     11.6x     1.3x      1.1x      10.8%     9.3%      1.1%      1.1%
4578.T Otsuka Holdings                Health Care                     20.1     3,590.0   2,900.0      -19.2%     EW    12.9x     12.1x     1.4x      1.3x      11.0%     10.8%     2.0%      2.2%
6503.T Mitsubishi Electric            Industrials                     19.9      925.0     880.0        -4.9%     OW    18.1x     13.0x     1.6x      1.5x      8.9%      11.2%     1.3%      1.3%
8001.T Itochu                         Industrials                     19.6     1,240.0   1,120.0       -9.7%     OW    7.0x      6.8x      1.1x      1.0x      16.1%     14.6%     3.2%      3.4%
6326.T Kubota                         Industrials                     18.7     1,489.0   1,200.0      -19.4%     EW    21.4x     19.2x     2.5x      2.3x      11.6%     11.8%     1.3%      1.3%
1605.T INPEX                          Energy                          18.7   510,000.0  642,000.0      25.9%     OW    11.5x     12.1x     0.8x      0.7x      6.7%      6.0%      1.4%      1.4%
4452.T Kao                            Consumer Staples                17.6     3,360.0   2,400.0      -28.6%     EW    27.4x     25.6x     2.4x      2.3x      8.8%      8.8%      1.9%      1.9%
6861.T Keyence                        Information Technology          17.1    30,950.0  20,000.0      -35.4%     UW    27.3x     26.1x     2.5x      2.3x      9.1%      8.7%      0.2%      0.2%
6971.T Kyocera                        Information Technology          17.0    9,240.0   10,500.0       13.6%     OW    17.6x     14.6x     1.1x      1.0x      6.1%      7.0%      1.4%      1.5%
6758.T Sony                           Consumer Discretionary          16.9     1,685.0   1,450.0      -13.9%     EW    27.7x     15.5x     0.9x      0.9x      3.2%      5.6%      1.5%      1.5%
6981.OS Murata Manufacturing          Information Technology          16.9     8,000.0   8,400.0        5.0%     OW    25.8x     21.6x     1.9x      1.8x      7.5%      8.4%      1.3%      1.3%
6752.T Panasonic                      Consumer Discretionary          16.6      717.0     610.0       -14.9%     EW    NA        18.5x     1.3x      1.2x      NA        6.5%      0.0%      1.0%
2503.T Kirin Holdings                 Consumer Staples                16.6     1,720.0   1,650.0       -4.1%     OW    29.4x     17.2x     1.5x      1.4x      5.1%      7.9%      1.7%      2.2%
8725.T MS&AD Insurance Group HoldingFinancials                        16.3     2,620.0   2,700.0        3.1%     OW    30.2x     26.2x     0.9x      0.9x      3.0%      3.3%      2.1%      2.1%
5401.T Nippon Steel & Sumitomo Metal Materials                        16.2      257.0     250.0        -2.7%     OW    18.3x     9.2x      1.0x      0.9x      5.2%      9.6%      1.5%      2.2%
8053.T Sumitomo Corp.                 Industrials                     15.4     1,226.0   1,150.0       -6.2%     EW    6.5x      6.3x      0.7x      0.7x      11.5%     10.9%     4.2%      4.2%
7974.OS Nintendo                      Information Technology          15.0    11,690.0   9,100.0      -22.2%     EW    43.8x     29.2x     1.2x      1.2x      2.8%      4.2%      1.3%      1.8%
7269.T Suzuki Motor                   Consumer Discretionary          14.7    2,407.0    2,340.0       -2.8%     UW    14.4x     13.1x     1.3x      1.2x      9.1%      9.3%      1.0%      1.3%



Note: For valuation methodology and risks associated with any price targets above, please email morganstanley.research@morganstanley.com with a request for valuation methodology and risks on
a particular stock. Please note that all important disclosures including personal holding disclosures and Morgan Stanley disclosures for stocks under coverage appear on the Morgan Stanley public
website at www.morganstanley.com/researchdisclosures.
Source: Modelware, Thomson Reuters, Morgan Stanley Research




                                                                                                                                                                                                       9
                                                                                 MORGAN          STANLEY         RESEARCH

                                                                                 April 15, 2013
                                                                                 Asia/GEMs Equity Strategy




                                                        Disclosure Section
The information and opinions in Morgan Stanley Research were prepared or are disseminated by Morgan Stanley Asia Limited (which accepts the
responsibility for its contents) and/or Morgan Stanley Asia (Singapore) Pte. (Registration number 199206298Z) and/or Morgan Stanley Asia
(Singapore) Securities Pte Ltd (Registration number 200008434H), regulated by the Monetary Authority of Singapore (which accepts legal
responsibility for its contents and should be contacted with respect to any matters arising from, or in connection with, Morgan Stanley Research),
and/or Morgan Stanley Taiwan Limited and/or Morgan Stanley & Co International plc, Seoul Branch, and/or Morgan Stanley Australia Limited (A.B.N.
67 003 734 576, holder of Australian financial services license No. 233742, which accepts responsibility for its contents), and/or Morgan Stanley Smith
Barney Australia Pty Ltd (A.B.N. 19 009 145 555, holder of Australian financial services license No. 240813, which accepts responsibility for its
contents), and/or Morgan Stanley India Company Private Limited, and/or PT Morgan Stanley Asia Indonesia and their affiliates (collectively, "Morgan
Stanley").
For important disclosures, stock price charts and equity rating histories regarding companies that are the subject of this report, please see the Morgan
Stanley Research Disclosure Website at www.morganstanley.com/researchdisclosures, or contact your investment representative or Morgan Stanley
Research at 1585 Broadway, (Attention: Research Management), New York, NY, 10036 USA.
For valuation methodology and risks associated with any price targets referenced in this research report, please email
morganstanley.research@morganstanley.com with a request for valuation methodology and risks on a particular stock or contact your investment
representative or Morgan Stanley Research at 1585 Broadway, (Attention: Research Management), New York, NY 10036 USA.
Analyst Certification
The following analysts hereby certify that their views about the companies and their securities discussed in this report are accurately expressed and
that they have not received and will not receive direct or indirect compensation in exchange for expressing specific recommendations or views in this
report: Jonathan Garner.
Unless otherwise stated, the individuals listed on the cover page of this report are research analysts.
Global Research Conflict Management Policy
Morgan Stanley Research has been published in accordance with our conflict management policy, which is available at
www.morganstanley.com/institutional/research/conflictpolicies.
Important US Regulatory Disclosures on Subject Companies
The equity research analysts or strategists principally responsible for the preparation of Morgan Stanley Research have received compensation based
upon various factors, including quality of research, investor client feedback, stock picking, competitive factors, firm revenues and overall investment
banking revenues.
Morgan Stanley and its affiliates do business that relates to companies/instruments covered in Morgan Stanley Research, including market making,
providing liquidity and specialized trading, risk arbitrage and other proprietary trading, fund management, commercial banking, extension of credit,
investment services and investment banking. Morgan Stanley sells to and buys from customers the securities/instruments of companies covered in
Morgan Stanley Research on a principal basis. Morgan Stanley may have a position in the debt of the Company or instruments discussed in this report.
Certain disclosures listed above are also for compliance with applicable regulations in non-US jurisdictions.
STOCK RATINGS
Morgan Stanley uses a relative rating system using terms such as Overweight, Equal-weight, Not-Rated or Underweight (see definitions below).
Morgan Stanley does not assign ratings of Buy, Hold or Sell to the stocks we cover. Overweight, Equal-weight, Not-Rated and Underweight are not the
equivalent of buy, hold and sell. Investors should carefully read the definitions of all ratings used in Morgan Stanley Research. In addition, since
Morgan Stanley Research contains more complete information concerning the analyst's views, investors should carefully read Morgan Stanley
Research, in its entirety, and not infer the contents from the rating alone. In any case, ratings (or research) should not be used or relied upon as
investment advice. An investor's decision to buy or sell a stock should depend on individual circumstances (such as the investor's existing holdings)
and other considerations.
Global Stock Ratings Distribution
(as of March 31, 2013)
For disclosure purposes only (in accordance with NASD and NYSE requirements), we include the category headings of Buy, Hold, and Sell alongside
our ratings of Overweight, Equal-weight, Not-Rated and Underweight. Morgan Stanley does not assign ratings of Buy, Hold or Sell to the stocks we
cover. Overweight, Equal-weight, Not-Rated and Underweight are not the equivalent of buy, hold, and sell but represent recommended relative
weightings (see definitions below). To satisfy regulatory requirements, we correspond Overweight, our most positive stock rating, with a buy
recommendation; we correspond Equal-weight and Not-Rated to hold and Underweight to sell recommendations, respectively.

                          Coverage Universe    Investment Banking Clients (IBC)
                                         % of                   % of % of Rating
Stock Rating Category        Count       Total     Count Total IBC Category
Overweight/Buy               1031        36%          402        39%         39%
Equal-weight/Hold            1250        44%          480        47%         38%
Not-Rated/Hold                105         4%           27         3%         26%
Underweight/Sell              467        16%          113        11%         24%
Total                       2,853                    1022
Data include common stock and ADRs currently assigned ratings. An investor's decision to buy or sell a stock should depend on individual
circumstances (such as the investor's existing holdings) and other considerations. Investment Banking Clients are companies from whom Morgan
Stanley received investment banking compensation in the last 12 months.
Analyst Stock Ratings
Overweight (O or Over) - The stock's total return is expected to exceed the total return of the relevant country MSCI Index, on a risk-adjusted basis
over the next 12-18 months.
Equal-weight (E or Equal) - The stock's total return is expected to be in line with the total return of the relevant country MSCI Index, on a risk-adjusted
basis over the next 12-18 months.
Not-Rated (NR) - Currently the analyst does not have adequate conviction about the stock's total return relative to the relevant country MSCI Index on
a risk-adjusted basis, over the next 12-18 months.
Underweight (U or Under) - The stock's total return is expected to be below the total return of the relevant country MSCI Index, on a risk-adjusted basis,
over the next 12-18 months.
Unless otherwise specified, the time frame for price targets included in Morgan Stanley Research is 12 to 18 months.




                                                                                                                                                              10
                                                                                              MORGAN            STANLEY           RESEARCH

                                                                                              April 15, 2013
                                                                                              Asia/GEMs Equity Strategy




Analyst Industry Views
Attractive (A): The analyst expects the performance of his or her industry coverage universe over the next 12-18 months to be attractive vs. the
relevant broad market benchmark, as indicated below.
In-Line (I): The analyst expects the performance of his or her industry coverage universe over the next 12-18 months to be in line with the relevant
broad market benchmark, as indicated below.
Cautious (C): The analyst views the performance of his or her industry coverage universe over the next 12-18 months with caution vs. the relevant
broad market benchmark, as indicated below.
Benchmarks for each region are as follows: North America - S&P 500; Latin America - relevant MSCI country index or MSCI Latin America Index;
Europe - MSCI Europe; Japan - TOPIX; Asia - relevant MSCI country index.
.
Important Disclosures for Morgan Stanley Smith Barney LLC Customers
Citi Research publications may be available about the companies or topics that are the subject of Morgan Stanley Research. Ask your Financial Advisor or use Research
Center to view any available Citi Research publications in addition to Morgan Stanley research reports.
Important disclosures regarding the relationship between the companies that are the subject of Morgan Stanley Research and Morgan Stanley Smith Barney LLC, Morgan
Stanley and Citigroup Global Markets Inc. or any of their affiliates, are available on the Morgan Stanley Smith Barney disclosure website at
www.morganstanleysmithbarney.com/researchdisclosures.
For Morgan Stanley and Citigroup Global Markets, Inc. specific disclosures, you may refer to www.morganstanley.com/researchdisclosures and
https://www.citigroupgeo.com/geopublic/Disclosures/index_a.html.
Each Morgan Stanley Equity Research report is reviewed and approved on behalf of Morgan Stanley Smith Barney LLC. This review and approval is conducted by the
same person who reviews the Equity Research report on behalf of Morgan Stanley. This could create a conflict of interest.
Other Important Disclosures
Morgan Stanley is not acting as a municipal advisor and the opinions or views contained herein are not intended to be, and do not constitute, advice within the meaning of
Section 975 of the Dodd-Frank Wall Street Reform and Consumer Protection Act.
Morgan Stanley produces an equity research product called a "Tactical Idea." Views contained in a "Tactical Idea" on a particular stock may be contrary to the
recommendations or views expressed in research on the same stock. This may be the result of differing time horizons, methodologies, market events, or other factors. For
all research available on a particular stock, please contact your sales representative or go to Client Link at www.morganstanley.com.
Morgan Stanley Research does not provide individually tailored investment advice. Morgan Stanley Research has been prepared without regard to the circumstances and
objectives of those who receive it. Morgan Stanley recommends that investors independently evaluate particular investments and strategies, and encourages investors to
seek the advice of a financial adviser. The appropriateness of an investment or strategy will depend on an investor's circumstances and objectives. The securities,
instruments, or strategies discussed in Morgan Stanley Research may not be suitable for all investors, and certain investors may not be eligible to purchase or participate in
some or all of them. Morgan Stanley Research is not an offer to buy or sell any security/instrument or to participate in any trading strategy. The value of and income from
your investments may vary because of changes in interest rates, foreign exchange rates, default rates, prepayment rates, securities/instruments prices, market indexes,
operational or financial conditions of companies or other factors. There may be time limitations on the exercise of options or other rights in securities/instruments
transactions. Past performance is not necessarily a guide to future performance. Estimates of future performance are based on assumptions that may not be realized. If
provided, and unless otherwise stated, the closing price on the cover page is that of the primary exchange for the subject company's securities/instruments.
The fixed income research analysts, strategists or economists principally responsible for the preparation of Morgan Stanley Research have received compensation based
upon various factors, including quality, accuracy and value of research, firm profitability or revenues (which include fixed income trading and capital markets profitability or
revenues), client feedback and competitive factors. Fixed Income Research analysts', strategists' or economists' compensation is not linked to investment banking or capital
markets transactions performed by Morgan Stanley or the profitability or revenues of particular trading desks.
Morgan Stanley Research is not an offer to buy or sell or the solicitation of an offer to buy or sell any security/instrument or to participate in any particular trading strategy.
The "Important US Regulatory Disclosures on Subject Companies" section in Morgan Stanley Research lists all companies mentioned where Morgan Stanley owns 1% or
more of a class of common equity securities of the companies. For all other companies mentioned in Morgan Stanley Research, Morgan Stanley may have an investment
of less than 1% in securities/instruments or derivatives of securities/instruments of companies and may trade them in ways different from those discussed in Morgan Stanley
Research. Employees of Morgan Stanley not involved in the preparation of Morgan Stanley Research may have investments in securities/instruments or derivatives of
securities/instruments of companies mentioned and may trade them in ways different from those discussed in Morgan Stanley Research. Derivatives may be issued by
Morgan Stanley or associated persons.
With the exception of information regarding Morgan Stanley, Morgan Stanley Research is based on public information. Morgan Stanley makes every effort to use reliable,
comprehensive information, but we make no representation that it is accurate or complete. We have no obligation to tell you when opinions or information in Morgan Stanley
Research change apart from when we intend to discontinue equity research coverage of a subject company. Facts and views presented in Morgan Stanley Research have
not been reviewed by, and may not reflect information known to, professionals in other Morgan Stanley business areas, including investment banking personnel.
Morgan Stanley Research personnel may participate in company events such as site visits and are generally prohibited from accepting payment by the company of
associated expenses unless pre-approved by authorized members of Research management.
Morgan Stanley may make investment decisions or take proprietary positions that are inconsistent with the recommendations or views in this report.
To our readers in Taiwan: Information on securities/instruments that trade in Taiwan is distributed by Morgan Stanley Taiwan Limited ("MSTL"). Such information is for your
reference only. Information on any securities/instruments issued by a company owned by the government of or incorporated in the PRC and listed in on the Stock Exchange
of Hong Kong ("SEHK"), namely the H-shares, including the component company stocks of the Stock Exchange of Hong Kong ("SEHK")'s Hang Seng China Enterprise
Index is distributed only to Taiwan Securities Investment Trust Enterprises ("SITE"). The reader should independently evaluate the investment risks and is solely
responsible for their investment decisions. Morgan Stanley Research may not be distributed to the public media or quoted or used by the public media without the express
written consent of Morgan Stanley. To our readers in Hong Kong: Information is distributed in Hong Kong by and on behalf of, and is attributable to, Morgan Stanley Asia
Limited as part of its regulated activities in Hong Kong. If you have any queries concerning Morgan Stanley Research, please contact our Hong Kong sales representatives.
Information on securities/instruments that do not trade in Taiwan is for informational purposes only and is not to be construed as a recommendation or a solicitation to trade
in such securities/instruments. MSTL may not execute transactions for clients in these securities/instruments.
Certain information in Morgan Stanley Research was sourced by employees of the Shanghai Representative Office of Morgan Stanley Asia Limited for the use of Morgan
Stanley Asia Limited.
Morgan Stanley is not incorporated under PRC law and the research in relation to this report is conducted outside the PRC. Morgan Stanley Research does not constitute
an offer to sell or the solicitation of an offer to buy any securities in the PRC. PRC investors shall have the relevant qualifications to invest in such securities and shall be
responsible for obtaining all relevant approvals, licenses, verifications and/or registrations from the relevant governmental authorities themselves.
Morgan Stanley Research is disseminated in Brazil by Morgan Stanley C.T.V.M. S.A.; in Japan by Morgan Stanley MUFG Securities Co., Ltd. and, for Commodities related
research reports only, Morgan Stanley Capital Group Japan Co., Ltd; in Hong Kong by Morgan Stanley Asia Limited (which accepts responsibility for its contents); in
Singapore by Morgan Stanley Asia (Singapore) Pte. (Registration number 199206298Z) and/or Morgan Stanley Asia (Singapore) Securities Pte Ltd (Registration number
200008434H), regulated by the Monetary Authority of Singapore (which accepts legal responsibility for its contents and should be contacted with respect to any matters
arising from, or in connection with, Morgan Stanley Research); in Australia to "wholesale clients" within the meaning of the Australian Corporations Act by Morgan Stanley
Australia Limited A.B.N. 67 003 734 576, holder of Australian financial services license No. 233742, which accepts responsibility for its contents; in Australia to "wholesale
clients" and "retail clients" within the meaning of the Australian Corporations Act by Morgan Stanley Smith Barney Australia Pty Ltd (A.B.N. 19 009 145 555, holder of
Australian financial services license No. 240813, which accepts responsibility for its contents; in Korea by Morgan Stanley & Co International plc, Seoul Branch; in India by
Morgan Stanley India Company Private Limited; in Indonesia by PT Morgan Stanley Asia Indonesia; in Canada by Morgan Stanley Canada Limited, which has approved of
and takes responsibility for its contents in Canada; in Germany by Morgan Stanley Bank AG, Frankfurt am Main and Morgan Stanley Private Wealth Management Limited,
Niederlassung Deutschland, regulated by Bundesanstalt fuer Finanzdienstleistungsaufsicht (BaFin); in Spain by Morgan Stanley, S.V., S.A., a Morgan Stanley group
company, which is supervised by the Spanish Securities Markets Commission (CNMV) and states that Morgan Stanley Research has been written and distributed in
accordance with the rules of conduct applicable to financial research as established under Spanish regulations; in the US by Morgan Stanley & Co. LLC, which accepts
responsibility for its contents. Morgan Stanley & Co. International plc, authorized and regulated by the Financial Services Authority, disseminates in the UK research that it




                                                                                                                                                                                      11
                                                                                             MORGAN           STANLEY            RESEARCH

                                                                                             April 15, 2013
                                                                                             Asia/GEMs Equity Strategy




has prepared, and approves solely for the purposes of section 21 of the Financial Services and Markets Act 2000, research which has been prepared by any of its affiliates.
Morgan Stanley Private Wealth Management Limited, authorized and regulated by the Financial Services Authority, also disseminates Morgan Stanley Research in the UK.
Private UK investors should obtain the advice of their Morgan Stanley & Co. International plc or Morgan Stanley Private Wealth Management representative about the
investments concerned. RMB Morgan Stanley (Proprietary) Limited is a member of the JSE Limited and regulated by the Financial Services Board in South Africa. RMB
Morgan Stanley (Proprietary) Limited is a joint venture owned equally by Morgan Stanley International Holdings Inc. and RMB Investment Advisory (Proprietary) Limited,
which is wholly owned by FirstRand Limited.
The information in Morgan Stanley Research is being communicated by Morgan Stanley & Co. International plc (DIFC Branch), regulated by the Dubai Financial Services
Authority (the DFSA), and is directed at Professional Clients only, as defined by the DFSA. The financial products or financial services to which this research relates will only
be made available to a customer who we are satisfied meets the regulatory criteria to be a Professional Client.
The information in Morgan Stanley Research is being communicated by Morgan Stanley & Co. International plc (QFC Branch), regulated by the Qatar Financial Centre
Regulatory Authority (the QFCRA), and is directed at business customers and market counterparties only and is not intended for Retail Customers as defined by the
QFCRA.
As required by the Capital Markets Board of Turkey, investment information, comments and recommendations stated here, are not within the scope of investment advisory
activity. Investment advisory service is provided in accordance with a contract of engagement on investment advisory concluded between brokerage houses, portfolio
management companies, non-deposit banks and clients. Comments and recommendations stated here rely on the individual opinions of the ones providing these
comments and recommendations. These opinions may not fit to your financial status, risk and return preferences. For this reason, to make an investment decision by relying
solely to this information stated here may not bring about outcomes that fit your expectations.
The trademarks and service marks contained in Morgan Stanley Research are the property of their respective owners. Third-party data providers make no warranties or
representations relating to the accuracy, completeness, or timeliness of the data they provide and shall not have liability for any damages relating to such data. The Global
Industry Classification Standard (GICS) was developed by and is the exclusive property of MSCI and S&P. Morgan Stanley bases projections, opinions, forecasts and
trading strategies regarding the MSCI Country Index Series solely on public information. MSCI has not reviewed, approved or endorsed these projections, opinions,
forecasts and trading strategies. Morgan Stanley has no influence on or control over MSCI's index compilation decisions. Morgan Stanley Research or portions of it may not
be reprinted, sold or redistributed without the written consent of Morgan Stanley. Morgan Stanley research is disseminated and available primarily electronically, and, in
some cases, in printed form. Additional information on recommended securities/instruments is available on request.
Morgan Stanley has based its projections, opinions, forecasts and trading strategies regarding the MSCI Country Index Series solely on publicly available information. MSCI
has not reviewed, approved or endorsed the projections, opinions, forecasts and trading strategies contained herein. Morgan Stanley has no influence on or control over
MSCI's index compilation decisions.
Morgan Stanley Research, or any portion thereof may not be reprinted, sold or redistributed without the written consent of Morgan Stanley.
Morgan Stanley Research is disseminated and available primarily electronically, and, in some cases, in printed form.
Additional information on recommended securities/instruments is available on request.




                                                                                                                                                                                    12
                                                          MORGAN    STANLEY            RESEARCH




The Americas               Europe                           Japan                           Asia/Pacific
1585 Broadway              20 Bank Street, Canary Wharf     4-20-3 Ebisu, Shibuya-ku        1 Austin Road West
New York, NY 10036-8293    London E14 4AD                   Tokyo 150-6008                  Kowloon
United States              United Kingdom                   Japan                           Hong Kong
Tel: +1 (1) 212 761 4000   Tel: +44 (0) 20 7 425 8000       Tel: +81 (0) 3 5424 5000        Tel: +852 2848 5200




© 2013 Morgan Stanley

				
DOCUMENT INFO
Shared By:
Categories:
Tags: Morgan, stanley
Stats:
views:1
posted:5/15/2013
language:
pages:13
Description: The risk / reward equation has started to deteriorate for Japan equities