The 720 STE initiation, Global Macro & Strategy, Weichai Power, Hanwha Aerospace, China Beer Sector, JP Telcos, India's AI C...

Equity Research 18 September 2026 | 7:23AM HKT

The 720: STE initiation, Global Macro & Strategy, Weichai Power, Hanwha Aerospace, China Beer Sector, JP Telcos, India’s AI Complex

In Focus | STE initiation Michael Snaith | ST Engineering – Tailwinds from aerospace MRO and international defence – Buy. We Goldman Sachs (Asia) L.L.C.

initiate coverage on ST Engineering with a Buy rating and a 12m TP of SGD13.20, Caleb Chan | forecasting above-consensus 2025–29E earnings and revenue CAGRs of 20% and Goldman Sachs (Asia) L.L.C.

12%, respectively. We expect top-line growth to be driven by significant airframe and engine MRO capacity expansion to capture robust commercial aerospace demand, alongside accelerated penetration into international defence markets amidst persistent European capacity shortages. Furthermore, we forecast operating margins to expand from 9.6% in 2025 to 11.5% in 2029E, supported by a favorable mix shift toward higher-margin engine MRO, an asset-light international defence strategy, and over SGD1bn in planned cumulative cost savings. Herbert Lu

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Global Macro & Strategy | US Rates, Competition for Capital, US Strategy

US Macro – September FOMC Recap: Hawkish Dots Show Two-Hike Baseline; Adding an October Hike. Following a more hawkish-than-expected September FOMC meeting that raised the funds rate by 25bp to 3.75-4%, we now expect the Committee to deliver a second 25bp hike in October. This revised expectation is driven by a 16-2 majority projecting at least one more hike this year, an upward revision in the median neutral rate dot from 3.06% to 3.25%, and Chairman Warsh’s commentary highlighting strong labor market data and inflation trends. We leave our terminal rate forecast unchanged at 3.25-3.5% by adding a third 25bp rate cut in March 2028 to the September and December 2027 rate cuts we already expected. Additional hikes beyond October are possible but remain outside our base case, as our core PCE inflation forecasts of 3.2% in 2026 and 2.2% in 2027 continue to track below the FOMC’s median projections. David Mericle

Global Strategy Views – Competition for Capital. We remain neutral on equities on a 3-month horizon given near-term bond market risks, but we maintain an overweight stance over 12 months as ongoing nominal GDP and earnings growth continue to propel returns. Rapidly rising bond yields and surging AI infrastructure capex have increased the cost of capital, temporarily eating into tech free cash flow and triggering a de-rating across major hyperscalers. However, we do not see a classic

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valuation or earnings bubble in the technology sector, as corporate balance sheets remain strong and structural compute demand continues to outstrip supply. With equity performance broadening geographically and stock correlations falling to multi-year lows, we recommend well-diversified exposure to capture alpha driven by resilient earnings rather than multiple expansion. Peter Oppenheimer

US Equity Views – Over-earning, but not an earnings bubble. We believe the S&P 500 is not in an earnings bubble, anticipating a deceleration rather than a collapse in corporate profits as we set a 12-month index target of 8,700. We forecast S&P 500 EPS to grow 11% to $415 in 2027 and $460 in 2028, supported by solid US GDP growth and a transition from AI infrastructure spending tailwinds to growing AI productivity boosts. Although recent extraordinary profitability was temporarily inflated by booming hyperscaler capex, peak…