Stock Markets August 26, 2026 11:31 AM

Morgan Stanley Flags Select Asian Picks; Cautions on Australian Banks

Banking faces headwinds while shipping and Japanese industrials draw analyst conviction

By Jordan Park
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Morgan Stanley updated its Asian equity recommendations, holding an underweight view on National Australia Bank amid valuation and earnings concerns, while keeping overweight calls on COSCO SHIPPING Energy Transportation and Mitsubishi Heavy Industries based on tanker-cycle timing and industrial earnings momentum.

Morgan Stanley Flags Select Asian Picks; Cautions on Australian Banks
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Key Points

  • Morgan Stanley maintains an underweight rating on National Australia Bank, citing a recent share-price rally, current trading multiples, an uncertain operating environment and a weak earnings outlook - impact on the banking sector.
  • The firm is overweight on COSCO SHIPPING Energy Transportation, anticipating that 2027 could be stronger than 2026 for the tanker cycle if reopening of the Strait of Hormuz is delayed; COSCO reported Q2 revenue of CNY 6.13 billion and net profit of CNY 1.83 billion - impact on shipping and energy transportation.
  • Morgan Stanley raised earnings forecasts and a price target for Mitsubishi Heavy Industries and kept an overweight stance following strong Q1 results and energy-business strength; the company also won a JPY 378 billion defense contract - impact on industrials and defense-related manufacturing.

Morgan Stanley has refreshed its stock views for the Asia-Pacific region, presenting a mix of defensive and cyclical convictions across banking, shipping and industrials as investors contend with an uneven operating backdrop.

The firm's guidance signals differentiated regional exposure: cautious positioning where valuation and earnings appear strained, and a more constructive stance where cyclical or contract-driven momentum supports upside.


National Australia Bank - Underweight

Morgan Stanley retains an underweight recommendation on National Australia Bank (NAB.AX). The bank's recent rally in July and prevailing trading multiples make current valuation harder to justify in the analyst's view. The firm points to an uncertain operating environment and a weak earnings outlook as the core reasons for its cautious rating.


COSCO SHIPPING Energy Transportation - Overweight

The investment bank keeps an overweight rating on COSCO SHIPPING Energy Transportation (1138.HK), taking a contrarian stance on the tanker cycle relative to broader market expectations. While many participants anticipate 2026 as the bull-cycle peak for tankers, Morgan Stanley projects that 2027 could produce stronger outcomes than 2026. That view is premised on the possibility of delays to the reopening of the Strait of Hormuz, a scenario that could prolong favourable market conditions for tanker operators.

Supporting the call, COSCO SHIPPING Energy Transportation posted solid second-quarter results, with revenue up 24% year-over-year to CNY 6.13 billion and net profit rising 46% to CNY 1.83 billion.


Mitsubishi Heavy Industries - Overweight

Morgan Stanley has upgraded earnings forecasts and raised its price target for Mitsubishi Heavy Industries (7011.T) following a robust first-quarter performance. The firm maintains an overweight recommendation, citing an outlook for continued profit generation and margin improvement driven by strength in the company's energy-related operations. These factors underpin the analyst's positive stance on the Japanese industrial conglomerate's earnings trajectory.

In a notable development cited by the bank, Mitsubishi Heavy Industries secured a JPY 378 billion contract from Japan's Ministry of Defense to develop and produce next-generation missile systems.


Context and investor considerations

Overall, Morgan Stanley's list illustrates uneven prospects across Asia-Pacific sectors: selective caution in Australian banking due to valuation and earnings risk, paired with conviction in specific shipping and industrial names where cycle timing or contract wins support upside. Investors navigating the region will face sector-specific fundamentals and cyclical dynamics that shape these differentiated recommendations.

Risks

  • Uncertain operating environment and weak earnings outlook for National Australia Bank that could further pressure valuation and share performance - affects the banking sector.
  • Timing risk around the reopening of the Strait of Hormuz; an earlier-than-expected reopening could alter tanker market dynamics and weaken the shipping sector thesis.
  • Cyclical shifts that reduce momentum in Mitsubishi Heavy Industries' energy business or disrupt margin improvement expectations, which would affect industrials' earnings trajectories.

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