Morgan Stanley expects a "significant pullback" in Asian stock markets due to the impact of Middle East conflict.

格隆汇 March 4｜Morgan Stanley stated that as the ongoing conflict in the Middle East puts previously strong-performing Asian growth stocks at risk, Asian stock markets may take a heavy hit. Jonathan Garner, Morgan Stanley's Chief Asia Equity Strategist, wrote in a report that given the strong returns of Asian stocks since the beginning of the year and their significant outperformance over US stocks, Asian markets are expected to experience a "significant pullback" both in absolute and relative terms. Although value attributes may help support the performance of Japanese and Korean stock markets, both countries are major energy importers. Considering the strong gains over the past 12 months, some degree of profit-taking is expected during broader risk reduction and position trimming. Beneficiaries of the "Kishida Strategy" may have more sustainability, such as companies related to economic security and supply chain resilience. Korean defense and companies related to the "super cycle" theme may be more resilient than during previous oil price shocks. Companies like SK Bioscience may face pressure from rising upstream petrochemical raw material costs.