3160.HK In-Depth Analysis: Positioning for Japan's Structural Revaluation, Capturing the Growth Dividend of AI Hardware Leaders

The Japanese stock market is standing at the starting point of a structural revaluation, with multiple factors converging to make its long-term investment value increasingly prominent.

1. The Return of Inflation, Corporate Profits Entering a Virtuous Cycle

As Japan's output gap narrows, inflation is steadily approaching the 2% policy target. Enhanced corporate pricing power, combined with wage growth and capital expenditure expansion, is expected to lead Japanese corporate profits into a more sustainable growth trajectory. This provides solid fundamental support for the Japanese stock market.

2. Continuous Release of Policy Dividends, Deepening Governance Reforms

Under the expectation of a long-term Sanae Takaichi government, Japan's growth strategy and national security policies are expected to accelerate. Simultaneously, the 2026 revision of the Corporate Governance Code will further encourage companies to improve capital efficiency, potentially enhancing shareholder return intentions and continuously boosting the investment value of Japanese listed companies.

3. Accelerated Inflow of Household Funds into the Market, Long-term Incremental Growth Anticipated

The NISA tax-advantaged investment account system facilitates Japanese residents' participation in the stock market, and the 2027 launch of Kids NISA will further expand the base of long-term investors. If Japanese households gradually reduce their cash and deposit allocations, household funds are expected to become a significant long-term source of capital for the Japanese stock market.

3160.HK Core Holdings Highlight: Focusing on Leading Growth Stocks in the AI Wave

3160.HK invests in high-quality Japanese companies within its tracking index, with Murata Manufacturing Co., Ltd. as one of its core holdings, demonstrating strong AI-related growth potential.

• Transitioning from Traditional Components to a Core AI Beneficiary

Murata is benefiting from the explosive growth in demand for MLCCs (Multi-Layer Ceramic Capacitors) from AI data centers. MLCCs are hailed as the "rice of the electronics industry," an indispensable basic component in terminal equipment like servers, smartphones, and automotive electronics. With the surge in AI computing demand, data center demand for high-reliability, miniaturized, high-capacity MLCCs has entered a multi-year structural uptrend. It is estimated that from FY3/26 to FY3/29, its MLCC sales CAGR will reach 22%.

• AI Servers Driving Structural Upgrade in MLCC Demand

Increased AI server power consumption and rack density are driving a significant increase in the number of MLCCs required per server rack, with products upgrading towards miniaturization and higher capacity, which is precisely Murata's technological strength. It is estimated that servers will account for 30%-40% of total MLCC demand in the next 2-3 years, surpassing automotive and smartphones. Murata's share of MLCC sales from data centers is also expected to increase from 13% in 2026 to 40% in 2029.

Source: J.P. Morgan, June 2026

🔹 Supply Side: Industry Capacity Expansion Faces Constraints, Tight Supply-Demand Balance Expected to Persist

MLCC capacity expansion faces significant difficulties, and the tight supply-demand situation may persist for a considerable time. According to J.P. Morgan research, constrained by current internal production equipment conditions, the industry still faces major challenges in increasing MLCC capacity by over 20%. Therefore, the tight supply-demand situation may last at least until FY2028. For Murata, the market expects its basic MLCC capacity to grow at an annual rate of about 10%; meanwhile, management plans to invest in side-forming processes before FY2027 to further increase capacitor capacity by 10%-15%. This means Murata has the capability to meet the incremental demand for high-end MLCCs driven by AI servers, but overall industry supply release remains relatively limited, thereby supporting the logic of subsequent supply-demand tightening and sustained improvement in the pricing environment.

Source: J.P. Morgan, June 2026

🔹 Pricing Environment and Inventory Structure Continue to Optimize

As the proportion of high-value-added data center demand increases, Murata's product mix improves, enhancing its pricing power. Concurrently, channel inventory has turned negative year-on-year ( -6% in May 2026), significantly better than the industry average (+13%). The tightening supply-demand landscape provides support for subsequent price recovery.

Source: UBS, June 2026

🔹 Leading Position Solid, Competitive Advantages Evident

Based on 2025 global MLCC shipment value, Murata's market share is as high as 40.8%, far exceeding SEMCO (22.5%) and Taiyo Yuden (11.3%). This means Murata is not only benefiting from the overall growth of the MLCC industry but is also one of the most representative, most elastic, and deepest-moat leading players in the MLCC upcycle driven by AI servers.

Source: Morgan Stanley, June 2026

🔹 Valuation Expected to Be Gradually Absorbed with Improving Profitability

From a valuation perspective, Murata's pricing is not solely reliant on AI theme sentiment; profit growth is expected to provide substantial support for its valuation. According to Morgan Stanley forecasts, Murata's ROE is expected to increase from about 12% in FY2026e to about 18% in FY2028e, while its forward P/B is expected to gradually decline from about 6.3x to about 5.1x. This suggests that the valuation is expected to be gradually absorbed with sustained improvements in profitability and capital returns, with the driving force for stock price appreciation coming more from fundamental improvement than theme speculation.

Source: Morgan Stanley, June 2026

In summary, Murata possesses the dual driving logic of both industry beta (MLCC demand expansion + AI server structural increment) and company-specific alpha (technological leadership + market share dominance + healthy inventory + strong pricing power + dual improvement in valuation and profitability). For investors accessing the Japanese market through 3160.HK, Murata is not just a weighted stock in the ETF's holdings but also a key vehicle for participating in the long-term growth of the global AI hardware industry chain.

ChinaAMC MSCI Japan Equity ETF (3160 HK): Asia's First USD-Hedged Japan Equity ETF, Aims to Reduce FX Volatility Impact, Tracks Japanese Stock Performance【1】

• ChinaAMC MSCI Japan Equity ETF (3160 HK) is Asia's first USD-denominated Japan equity ETF employing a USD hedging strategy.

• Provides investment returns closely tracking the MSCI Japan Index (100% USD Hedged).

• The fund aims to hedge JPY/USD exchange rate risk by selling JPY forward contracts, seeking to reduce the impact of FX volatility on fund returns, helping investors pursue potential returns from the Japanese stock market while striving to reduce uncertainty from currency factors.

Information Sources:

1. Japan Summer School: Japan Equity Strategy: Structural Tailwinds and Investment Themes Behind Japan ’ s Secular Bull Market, 22 June 2026.

2. Murata Mfg Now Our Top Pick, Lowering Taiyo Yuden to UW, Morgan Stanley. 22 June 2026.

3. Murata Manufacturing (6981) Becoming a top Al stock; raising our price target, JPMorgan, 12 June 2026.

4. Murata Manufacturing Transitioning into an Al-related stock, raising price target, UBS, 12 June 2026.

Investment involves risks, including possible loss of principal. Any forecasts, outlooks, or opinions contained herein are for reference only and are not guaranteed to be realized. The information in this document reflects market conditions and our views as of the date of publication and is subject to change without notice. The issuer of this material is China Asset Management (Hong Kong) Limited. This material has not been reviewed by the Securities and Futures Commission of Hong Kong. For full details and risks of the mentioned fund, please refer to our official website and fund offering documents.