Furui: Strong Profit Momentum in China Driving 15% Upside Potential, Bullish on High-Growth Technology Manufacturing Sector

Furui released the 2026 Asia outlook report, stating that Asian stock markets have risen by about 25% so far this year, mainly driven by a revaluation of price-to-earnings ratios. However, the expectation of a weakening US dollar, a resilient macro environment, and continuing strong corporate profit momentum are all providing support for Asian markets. South Korea and China continue to show strong momentum, and the Indian stock market has also repeatedly hit new highs. Japan remains attractive against the backdrop of the TSE Reform Acceleration, and the Australian market is also performing steadily. The commercialization of AI and normalization of monetary policy have closely linked the fate of the US market to the AI capital spending cycle. It is expected that in the middle of 2026, the reality test of AI return on investment will be faced, and the US dollar exchange rate will peak, helping Asian and emerging markets outperform the rest of the world. Internal trade in emerging markets is thriving, and China's self-sufficiency in artificial intelligence (AI) and anti-retreat policies are driving a new round of growth momentum. Japan faces the challenge of normalization of policies, and the Bank of Japan may respond to continued inflation by raising interest rates, but asset prices are still supported. The report points out that while there are risks from tariffs and trade friction, the macroeconomic environment in Asia is stronger than in previous periods. In addition to Japan in the Asia-Pacific region, Furui expects South Korea and China to outperform India; growth value stocks are preferred over value investments. Growth momentum comes from AI, new era commodities, high-tech manufacturing, infrastructure, and the consumer sector. Corporate profit momentum is strong, with MSCI Asia Pacific (excluding Japan) earnings per share growth expected to accelerate to 18% in 2026. Furui mentions that in China, strong profit momentum is driving a 15% upside potential, as China shifts towards private enterprises and high-tech manufacturing in the "15th Five-Year Plan." Consensus forecasts project a 16% earnings per share growth in 2026, while the compound annual growth rate for private enterprises from 2026 to 2027 is expected to reach 20%. Core themes include high-growth tech manufacturing, sustainable income stocks, and potential A-share companies listed in Hong Kong. Furui's research team is optimistic about alternative energy (lithium batteries, CECEP Solar Energy), automotive, beauty, healthcare, industrial automation, internet tech, and semiconductor sectors in 2026. They are cautious about the materials sector and durable consumer goods/apparel, and adopt a selective strategy for food and beverage. Furui recommends the following theme stocks for 2026: Tencent (00700) Contemporary Amperex Technology (300750.SZ)(03750) Sungrow Power Supply (300274.SZ) Shenzhen Mindray Bio-Medical Electronics (300760.SZ) Inner Mongolia Yili Industrial Group (600887.SH) GEELY AUTO (00175) Galaxy Entertainment Group (00027) Hwatsing Technology (688120.SH) DongGuan YiHeDa Automation (301029.SZ) Shenzhen Injoinic Technology (688209.SH)