Where did orders slow in October?

  • Orders continued to grow in October at most domestic manufacturers tracked by Morgan Stanley, but at a slower rate than in the first nine months of 2026. Automation manufacturer Xinjie Electric's new orders grew more than 25% year on year in the first nine months, before growth slowed in October.
  • Machine tool maker Tsugami China recorded a slight year-on-year increase in new orders in October, below the strong double-digit growth of the first nine months; speed reducer manufacturer Guomao's orders grew by a single-digit percentage year on year in October, compared with growth of at least 10% in the first nine months.
  • This indicates that orders continued to grow, but the earlier faster pace was not sustained across the board in October.

Why did foreign brands' sales in China appear more stable?

  • According to data from MIR, tracked foreign brands' servo sales in China rose 9% year on year in October, while low-voltage inverter sales rose 13%; the corresponding growth rates for the first nine months of 2026 were 8% and 10%, respectively, indicating a broadly stable overall trend.
  • Morgan Stanley believes the growth came mainly from AI-related downstream demand. This coexisted with slower orders at some domestic manufacturers, reflecting uneven performance in demand across products and customers. Foreign brands' sales revenue and domestic manufacturers' new orders are also different metrics.

Why does the institution remain relatively positive amid diverging demand?

  • General equipment manufacturer Haitian International's orders rose by a low-single-digit percentage year on year in October, with domestic China orders down by a low-double-digit percentage and overseas orders up by a low-double-digit percentage. Overseas growth coincided with domestic weakness, showing that demand did not improve across the board.
  • The market is focused on slowing growth in the fourth quarter. Morgan Stanley acknowledges mixed demand trends but believes the capital expenditure cycle is broadening and AI-related downstream demand continues to provide support, so it remains relatively positive on the sector; its Asia-Pacific industry view is in-line.