Morgan Stanley Identifies Chinese Stocks with Potential Rebound from Middle East Ceasefire

Morgan Stanley strategists based in Singapore and Hong Kong analyzed Chinese companies with significant revenue from the Middle East. These companies saw stock price declines from the end of February to April 7, 2025, amid escalating tensions in the region.

The strategists screened for Asia Pacific firms generating more than 5% of revenue from the Middle East and falling more than 5% in that period.

A two-week ceasefire in the Iran war was announced on Wednesday morning Asia time. Following the news, the mainland China CSI 300 stock index rose over 4%, and the Hang Seng Index increased over 3% in a holiday-shortened week. The ceasefire signals potential de-escalation of geopolitical tensions.

The strategists expect investors to re-engage with Asia stocks, including themes related to the artificial intelligence supply chain. They anticipate interest in recent themes as well. Spending on energy security, defense, and renewables is expected to remain robust regardless of developments in the Strait of Hormuz.

Selected Chinese Companies The analysis identified three Chinese companies that fell more than 10% during the study period.

Horizon Robotics, a Hong Kong-listed automotive chipmaker, sources about 10% of its revenue from the Middle East and declined 16%. The stock is rated overweight by Morgan Stanley. Zoomlion Heavy Industry, a Hong Kong-listed construction equipment company, generates about 10% of its revenue from the Middle East and fell 15%.

This stock is also rated overweight. 9% and is rated equal weight. The strategists noted that while the Middle East conflict was one factor in the share price corrections, these companies could benefit from de-escalation and improvements in supply chains.

For China, resilience in industrials and renewable energy sectors may attract investor attention due to demand for energy storage system-backed cleantech solutions.

Broader Economic Context Morgan Stanley sees broad upside for China stocks this year, though with high uncertainty in the coming months.

China's factory prices rose in March for the first time in three years, influenced by an oil price surge. Consumer prices increased by 1%, below analyst expectations. China's energy security position has provided a defensive stance in down markets.

However, deflationary pressures and a defensive consumer and fiscal outlook present challenges for earnings. China is scheduled to report March trade data on April 15, 2026, and first-quarter GDP on April 17, 2026.