Defense Trends - Restocking, Deterrence and Autonomy

Morgan Stanley hosted its Singapore Defence Day on October 6, building on recent discussions with the US and Korean security ecosystems. Resolution of current conflicts may take a long time, driving a major restocking cycle, with platforms and procurement changing profoundly in response. At a thematic level, the report continues to see support for Defence Spending beneficiaries as budgets ramp in response to shifting geopolitics, emerging technologies and stockpile drawdowns. Asia's defence spending has entered an accelerated inflection phase, with CAGR rising to 6.6% over 2022-26 versus 4.5% over 2012-22, reaching an estimated US$700bn in 2026, and expected to reach US$1.0-1.2trn by 2030. Investors are advised to favor upstream capital goods manufacturers, specialized defence electronics/C4ISR integrators, shipyards and infrastructure EPC contractors as well as high-volume munitions producers. Within regional equity allocation, the report maintains an Overweight stance on Japan, Korea