Morgan Stanley released a research report stating that regarding the fundamentals of the mainland software industry, the firm remains cautious as it expects mainland GDP growth to decelerate with deflationary pressures persisting. Corporate confidence in IT investment remains low, and the firm believes recovery will only occur 1-2 years after deflation ends. Before substantial demand recovery emerges, any supply-side driven new technology trends can only prompt redistribution of existing budgets within the market.

From a capital perspective, the firm believes the sector will follow overall market liquidity in a low interest rate environment with higher beta characteristics, as active fund allocations to the sector remain extremely low. Thematic investments such as AI applications, technology localization, and stablecoins may have significant impact on share prices, but the firm has not yet identified themes that can truly reverse industry fundamentals.

Regarding stock selection, the firm strongly recommends H-shares over A-shares. The industry top pick is BEISEN HOLDING (09669) with a target price of HK$10.3 and an "Overweight" rating, expecting accelerated revenue growth. Secondary picks include KINGDEE INT'L (00268), CHINASOFT INT'L (00354), and KINGSOFT (03888) with target prices of HK$14.2, HK$6.6 (raised from HK$5.4), and HK$38 respectively, all rated "Equal Weight".