Morgan Stanley is Cautious On Chinese Smartphone Stocks

Morgan Stanley issued a report titled "China Smartphone Monthly" where the firm highlighted several Chinese cell phone manufacturers heading into 2016. The firm noted that 2015 was a poor year for many Chinese cell phone manufacturers and while Apple Inc. AAPL has taken market share from Android providers, demand has been stagnant and pricing for the company's flagship iPhone has been difficult. Bill Lu, Jasmine Lu, and other Morgan Stanley analysts wrote, "We remain cautious on Android-based brand names and stay selective on component names for higher value-add." Morgan Stanley is currently Underweight the Android manufacturers including TCL Communication Tech Holdings Ltd. (HKG) and HTC Corp. (TPE) and is Evenweight Lenovo Group Limited (HKG). However, Morgan Stanley is currently Overweight ZTE Corporation (SHE) due to their rollout of 4G BTS, a growing enterprise network, and support from the Chinese Government, particularly regarding chipset development. Regarding the overall Chinese smartphone market analysts believe that the sell-in strength seen in October was due to inventory restock, not a rebound in demand. Further weakness in the market is shown by a decline in demand for Apple products. In response Morgan Stanley lowered forecasts of iPhone sales in China due to many factors including declining supply chain data points and the company's product cycle. Apple Inc. last traded at $106.98, down 0.97 percent. TCL is trading at 5.78. HTC is trading at 79.00 Lenovo is trading at 8.01. ZTE is trading at 18.36.