April 19, 2010
Global Equity Strategy
Buy Energy, Sell Materials
We are upgrading Energy to overweight and
downgrading Materials to neutral. We have been
tactically cautious on Energy. Our concern was that
earnings risks – primarily an oversupplied US natural
gas market and refining margin pressures – were
underappreciated. We think this has changed.
We think sector-specific and macroeconomic
factors are now more supportive for Energy than for
Materials. Oil price fundamentals are improving and
should continue to firm heading into 2H10. There is a
large differential between spot, the forward curve, and
the oil price embedded in earnings expectations. Also,
macro factors – a peak in growth momentum, rate
tightening cycle – have historically supported relative
outperformance.
Our upgrade is an earnings call. Energy multiples
are more likely to compress than expand. Valuation
appeal is more regional and industry specific rather than
sector specific. Within Oil & Gas we like the super
majors in Europe (Total, BP), where they are cheaper
than their US counterparts and are supported by a
strong currency tailwind. We like the mini majors in the
US (Hess Corp, Occidental Petroleum) where there is
greater leverage to the oil price. Within Oil Services, our
preference is primarily in the US, where we stick with the
large-cap players (Schlumberger, Weatherford, Saipem)
while in E&P we like Woodside, Noble, and Tullow.
We are taking profits on Materials. We are concerned
that: 1) value is already hard to find; 2) earnings already
incorporate a return to (close to) peak levels for many
commodities; 3) earnings momentum is fading; 4) the
market has already become more discerning on stock
selection; 5) continued Chinese policy tightening and
recent measures to rein in property prices have the
potential to dampen sentiment towards the commodity
related sectors; and 6) there may be tax changes in
Australia – possible introduction of a resource rent tax
affecting the Australian miners.

Selected Energy Stocks
Company
Country
Price
(USD)
2011e
P/E*
MS
Rating
BP plc
United Kingdom
9.89
6.6x
O / A
Hess Corporation
United States
63.65
7.9x
O / A
Noble Energy
United States
77.30
12.2x
O / I
Occidental Petroleum
United States
85.06
9.6x
O / A
Saipem S.p.A.
Italy
38.81
13.4x
O / A
Schlumberger
United States
65.80
12.4x
O / A
TOTAL
France
58.06
6.7x
O / A
Tullow Oil PLC
United Kingdom
19.95
23.0x
O / A
Weatherford International
United States
16.53
10.2x
O / A
Woodside Petroleum Ltd.
Australia
42.29
13.7x
O / A

Source: Morgan Stanley Research *MS Analyst estimate
Options Trade: Long Energy Call / Short Materials
Call
Our derivative strategy team likes buying calls on
Energy and selling calls on Materials to position for
Energy outperformance in an up-market. Implied
volatility on US Materials (and on Miners in Europe) is
higher than Energy, making relative pricing
attractive. On an absolute basis Materials implied
volatility is above that of Energy, meaning the trade
can be done for no upfront outlay or a net credit (see
page 7 for detail).
Morgan Stanley does and seeks to do business with
companies covered in Morgan Stanley Research. As
a result, investors should be aware that the firm may
have a conflict of interest that could affect the
objectivity of Morgan Stanley Research. Investors
should consider Morgan Stanley Research as only a
single factor in making their investment decision.
For analyst certification and other important
disclosures, refer to the Disclosure Section,
located at the end of this report.
+= Analysts employed by non-U.S. affiliates are not registered with FINRA, may not be
associated persons of the member and may not be subject to NASD/NYSE restrictions on
communications with a subject company, public appearances and trading securities held by a
research analyst account.



M O R G A N S T A N L E Y R E S E A R C H
N O R T H A M E R I C A

Morgan Stanley & Co. Incorporated Jason Todd, CFA
Jason.E.Todd@morganstanley.com
+1 (1)212 761 7991
Morgan Stanley Australia Limited+ Gerard Minack
Gerard.Minack@morganstanley.com
+61 2 9770 1529
Morgan Stanley & Co. Incorporated Phillip Neuhart
Morgan Stanley & Co. Incorporated Naseh Kausar




2


M O R G A N S T A N L E Y R E S E A R C H
April 19, 2010
Global Equity Strategy
Global Equity Strategy Recommended List*
MS Analyst
GICS
Mkt Cap
Date
Total USD Ret.
Latest
Price
Price Target
FY1 Div
NTM
P/B
ROE
MS
Company
Ticker
Rating
Country
Sector
USD bn
Added
Since Added
Price (LC) Target (LC)
Upside, %
Yield
P/E
FY1
Analyst
BorgWarner Inc.
BWA-US
O / I
United States
Cons Disc
4.5
12/14/2009
20.0%
+
38.35
40.00
2.2%
0.13
19.4x
2.1x
8.32
Shanker, Ravi
Toyota Motor Corp.
6900643
O / A
Japan
Cons Disc
125.6
12/14/2009
-3.5%
3,695.00
4,350.00
20.0%
1.37
22.5x
1.1x
1.17
Hirakata, Noriaki
Sony Corp.
6821506
O / I
Japan
Cons Disc
36.4
12/14/2009
23.5%
+ 3,350.00
4,000.00
20.5%
0.76
32.9x
1.1x
NM
Ono, Masahiro
Yum! Brands Inc.
YUM-US
O / I
United States
Cons Disc
19.9
12/14/2009
23.9%
+
42.70
45.00
5.4%
2.01
16.7x
19.1x
NM
Glass, John
Wal-Mart Stores Inc.
WMT-US
NC
United States
Cons Staples
203.4
12/14/2009
0.6%
54.11
NA
NA
2.05
13.3x
2.9x
19.71
NA
Danone S.A.
BN-FR
O / I
France
Cons Staples
37.7
12/14/2009
1.0%
45.56
52.00
14.9%
2.75
16.9x
2.1x
11.36
Steib, Michael
Diageo PLC
0237400
O / I
United Kingdom Cons Staples
44.2
12/14/2009
4.5%
11.45
12.00
5.0%
3.27
14.9x
7.4x
43.82
Steib, Michael
Japan Tobacco Inc.
6474535
O / I
Japan
Cons Staples
34.0
12/14/2009
11.9%
+ 327,500.00 405,000.00
27.0%
1.80
19.0x
2.0x
7.43
Demura, Taizo
Kellogg Co.
K-US
O / C
United States
Cons Staples
20.6
12/14/2009
1.6%
54.04
60.00
11.6%
2.85
14.6x
9.1x
64.79
Andrews, Vincent
Philip Morris International Inc.
PM-US
O / I
United States
Cons Staples
95.4
12/14/2009
3.3%
50.74
57.00
11.0%
4.72
13.0x
16.8x
NM
Adelman, David
Saipem S.p.A.
SPM-IT
O / A
Italy
Energy
16.9
4/18/2010
0.0%
28.73
37.00
29.1%
1.87
17.5x
3.6x
17.99
Rats, Martijn
Noble Energy Inc.
NBL-US
O / I
United States
Energy
13.5
4/18/2010
0.0%
77.30
0.94
21.6%
0.80
20.8x
2.2x
9.13
Richardson, Stephen
Schlumberger Ltd.
SLB-US
O / A
United States
Energy
78.7
12/14/2009
6.5%
+
65.80
140.00
114.6%
1.30
20.6x
4.1x
16.72
Slorer, Ole
Total S.A.
FP-FR
O / A
France
Energy
129.7
12/14/2009
-8.4%
42.99
52.00
21.3%
5.45
9.2x
1.8x
17.86
Jothilingam, Theepan
Occidental Petroleum Corp.
OXY-US
O / A
United States
Energy
69.1
4/18/2010
0.0%
85.06
107.00
26.3%
1.64
13.3x
2.4x
15.03
Calio, Evan
Credit Suisse Group AG
CSGN-CH
O / C
Switzerland
Financials
61.0
12/14/2009
5.0%
55.35
69.00
25.3%
3.80
8.8x
1.7x
18.08
van Steenis, Huw
Macquarie Group Ltd.
MQG-AU
O / I
Australia
Financials
15.9
12/14/2009
10.0%
+
51.59
60.60
20.6%
3.59
12.1x
1.6x
9.68
Wiles, Richard
Nomura Holdings Inc.
8604-JP
O / I
Japan
Financials
27.4
12/14/2009
0.7%
688.00
850.00
27.1%
1.53
16.7x
1.2x
3.46
Ban, Hideyasu
Aegon N.V.
AGN-NL
O / I
Netherlands
Financials
12.4
12/14/2009
9.8%
+
5.36
7.50
41.7%
0.65
9.9x
0.7x
6.43
Hanif, Farooq
Baxter International Inc.
BAX-US
O / A
United States
Health Care
35.6
12/14/2009
0.8%
59.10
68.00
14.6%
2.04
13.5x
4.9x
36.68
Lewis, David
Abbott Laboratories
2002305
O / A
United States
Health Care
81.1
12/14/2009
-1.3%
52.26
63.00
19.1%
3.10
12.1x
3.5x
28.88
Lewis, David
Amgen Inc.
AMGN-US
O / I
United States
Health Care
59.5
12/14/2009
6.8%
+
60.72
69.00
13.6%
0.00
11.6x
2.7x
22.49
Harr, Steven
AstraZeneca PLC
AZN-GB
O / A
United Kingdom Health Care
65.6
2/5/2010
5.7%
29.32
35.40
20.3%
5.47
7.6x
3.3x
36.24
Baum, Andrew
Roche Holding AG
ROG-CH
O / A
Switzerland
Health Care
142.4
12/14/2009
3.9%
175.10
227.00
29.3%
3.86
12.9x
20.5x
63.60
Baum, Andrew
Thermo Fisher Scientific Inc.
2886907
O / A
United States
Health Care
21.8
12/14/2009
8.7%
+
53.26
55.00
3.0%
0.00
15.2x
1.5x
8.77
Urist, Marshall
Danaher Corp.
DHR
O / A
United States
Industrials
25.8
2/5/2010
12.5%
+
79.83
0.85
6.4%
0.19
18.4x
2.2x
11.30
Davis, Scott
General Electric Co.
GE
O / A
United States
Industrials
202.4
2/5/2010
20.9%
+
18.97
22.00
16.2%
2.13
16.9x
1.7x
9.79
Davis, Scott
Honeywell International Inc.
HON
O / A
United States
Industrials
35.0
2/5/2010
23.2%
+
45.82
51.00
0.1
2.70
17.5x
4.0x
19.38
Davis, Scott
Komatsu Ltd.
6301-JP
O / A
Japan
Industrials
20.8
2/5/2010
6.1%
1,918.00
2,500.00
33.3%
0.96
24.4x
2.2x
4.27
Ibara, Yoshinao
SMC Corp.
6763965
O / A
Japan
Industrials
9.5
12/14/2009
16.2%
+ 12,780.00 14,000.00
12.7%
0.82
28.5x
1.8x
3.09
Ibara, Yoshinao
Union Pacific Corp.
UNP-US
O / A
United States
Industrials
38.4
12/14/2009
16.8%
+
75.95
81.00
7.4%
1.45
16.4x
2.3x
12.47
Greene, William
Orient Overseas (International) L 316-HK
O / I
Hong Kong
Industrials
5.1
3/31/2010
8.9%
+
62.65
68.00
12.6%
4.53
8.6x
1.2x
13.80
Loh, Sophie
McAfee Inc.
MFE-US
O / I
United States
Tech
6.4
3/31/2010
0.2%
40.23
48.00
19.9%
0.00
14.2x
3.0x
18.29
Holt, Adam
Microsoft Corp.
MSFT-US
O / I
United States
Tech
269.0
12/14/2009
2.3%
30.67
38.00
23.9%
1.64
14.3x
6.1x
40.70
Holt, Adam
Apple Inc.
AAPL-US
O / A
United States
Tech
224.3
12/14/2009
25.6%
+
247.40
250.00
1.1%
0.00
18.9x
6.3x
28.64
Huberty, Katy
Monsanto Co.
MON-US
O / A
United States
Materials
35.3
12/14/2009
-21.6%
64.73
95.00
42.3%
1.57
18.7x
3.3x
16.89
Andrews, Vincent
Nippon Steel Corp.
6642569
O / A
Japan
Materials
24.1
12/14/2009
-5.0%
353.00
5.10
47.0%
0.48
12.4x
1.3x
NM
Goroh, Harunobu
Vedanta Resources PLC
VED-GB
O / I
United Kingdom Materials
11.7
12/14/2009
8.9%
+
27.96
4,272.00
55.9%
0.93
8.2x
3.4x
13.56
Ravi, Ephrem
AT&T Inc.
T-US
O / A
United States
Telecom
153.0
12/14/2009
-4.6%
25.93
32.00
21.3%
6.37
11.8x
1.5x
12.60
Flannery, Simon
Telefonica S.A.
TEF-ES
O / I
Spain
Telecom
108.5
12/14/2009
-16.4%
17.61
23.00
30.7%
7.94
9.7x
3.7x
35.19
Prota, Luis
MSCI World
4.9%
*For global developed markets. Valuation data are based on consensus estimates from Factset. Portfolio inception date: 12/14/2009 Source: Morgan Stanley Research Past performance is no indication of future results. Please note that all
important disclosures regarding the stocks in the Recommended List, including personal holdings disclosures and Morgan Stanley disclosures, appear on the Morgan Stanley public website at www.morganstanley.com/researchdisclosures.

We acknowledge the contributions of Bijit Maji, Ankush Agrawal, Aishorjyo Ghosh and Vinod Puthucode in compiling this report




3


M O R G A N S T A N L E Y R E S E A R C H
April 19, 2010
Global Equity Strategy
Buy Energy, Sell Materials
We are upgrading Energy to overweight and downgrading
Materials to neutral. Our Energy overweight is now consistent
with that of our European Strategy team, who have the sector
as their largest overweight (see European Strategy: Timing
Tactics, April 15, 2010) and with our Emerging Market strategy
team, who are also bullish on the Energy sector.
Exhibit 1
Energy vs. Material Sector Switch
-3.0%
-2.0%
-1.0%
0.0%
1.0%
2.0%
3.0%
Financials
Cons Disc
Utilities
Info Tech
Telecom
Materials
Cons Staples
Energy
Health Care
Industrials
Sector Allocation - Deviation from Benchmark (MSCI World)

Source: MSCI, Morgan Stanley Research
Energy: Risks better recognized in EPS Expectations
We have been tactically cautious on Energy (see Global
Strategy – 2010 Outlook, December 2009) but four things have
now changed.
Exhibit 2
Energy Equities to Catch up to Energy Prices?
Energy Stocks and Energy Prices
120
240
360
480
600
720
2004
2005
2006
2007
2008
2009
2010
90
180
270
360
450
540
Energy Prices* (LHS)
Global Oil/Gas Stocks
* Bloomberg 3M Energy Price Index
Index
Index

Source: Data Stream, Morgan Stanley Research
First, earnings risks that made us cautious at the start of the
year - an oversupplied US natural gas market, refining margin
pressure and a stronger USD – are now better recognized and
embedded in expectations. In addition, upstream margin
expansion as cost inflation lags crude prices has the potential
to provide ongoing earnings support above and beyond where
the consensus is positioned.
Second, macro conditions are becoming more supportive for
relative outperformance. Historically, Energy has been one of
the best performing sectors following a peak in leading
economic indicators and around global rate tightening cycles.
We are now approaching both (see Exhibit 3).
Exhibit 3
Buy Energy pre Fed Rate Tightening Cycle
Before First Hike
After First Hike
-12M
-6M
-3M
+3M
+6M
+12M
S&P 500 Performance
Defensives
13.5%
4.8%
0.0%
0.0%
5.0%
9.2%
Cyclicals
17.8%
6.7%
1.7%
1.0%
10.0%
5.0%
Financials
9.8%
2.0%
-1.9%
-2.3%
1.7%
2.4%
Energy
20.8%
10.2%
7.3%
-0.4%
0.0%
-1.3%
MSCI Europe Performance
Defensives
-1.8%
-0.1%
0.4%
2.7%
2.6%
4.3%
Cyclicals
6.1%
2.7%
1.3%
1.6%
3.3%
1.7%
Financials
4.4%
1.3%
-0.5%
-0.3%
-0.8%
2.7%
Energy
8.7%
5.9%
3.4%
2.6%
-0.1%
0.2%
Average Performance in Last 7 Cycles Since 1976

Source: Morgan Stanley Research
Three, a weak euro is providing a powerful tailwind for the
European Energy sector that is not equally offset by the
headwind of a stronger USD for US Energy.
Last, medium-term oil fundamentals are improving. We think
they will continue to firm as we head into 2H10. The 12-month
forward strip ($89/bbl) sits above the current spot ($84/bbl) and
the implied oil price embedded in earnings expectations
($78-80/bbl). We think the sector could be entering an earnings
upgrade cycle as expectations catch up to the energy price.
Exhibit 4
Global Energy Valuations at Above-Average Levels
3/31/10
0.79
0.20
0.40
0.60
0.80
1.00
1.20
1.40
1.60
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
MSCI World Energy relative to Ex-Energy P/E
Average 0.67
Average 0.90

Source: Fact Set, Morgan Stanley Research




4


M O R G A N S T A N L E Y R E S E A R C H
April 19, 2010
Global Equity Strategy
Energy is about earnings, not valuations. The sector is
trading slightly above its recent long-term average valuation
(Exhibit 4). There is also little difference between its earnings
and market cap weight in global indices (often a catalyst for
re-rating). Despite underperforming across key developed
regions year to date (both in the US and Europe), it offers little
more relative valuation appeal than it did in January (Exhibit 5).
We think multiples are more likely to compress rather than
expand from this point onwards as price performance lags a
strong forecast EPS recovery (32% in 2010 and 25% in 2011
globally).
Exhibit 5
Little change in Valuations Year to Date
Energy Sector Relative Forward P/E (Dec-09 to Mar-10)
0.50
0.60
0.70
0.80
0.90
1.00
1.10
Dec
Jan
Feb Mar
Dec
Jan
Feb Mar
Dec
Jan
Feb Mar
US Energy Rel. to the
Market
Europe Energy Rel. to
the Market
Euro Rel. / US Rel.

Source: Fact Set, Morgan Stanley Research
Energy is relative play on Regions and Industries:
Although aggregate valuation metrics are broadly neutral for
global Energy, there is a reasonable valuation case for
European over US Oil & Gas (Exhibit 6) and US over European
Equipment & Services.
Exhibit 6
Buy European Oil & Gas
MSCI USA less MSCI Europe: Energy Oil & Gas
Average of Z-Scores: NTM P/E, P/B, P/C, and P/Div
-1.50
-1.00
-0.50
0.00
0.50
1.00
1.50
1995
1997
1999
2001
2003
2005
2007
2009
US Undervalued
Europe Undervalued

Source: Data Stream, Fact Set, Morgan Stanley Research

We like the dividend yield support of the European super
majors (4.9%) which is more than double that of their US
counterparts (2.2%). In addition, while European Oil and Gas
has a more muted growth profile (BP, Shell, Total and BG
Group versus Exxon, Chevron and Conoco), a weak euro has
traditionally corresponded with consistent outperformance of
European large-cap Oil & Gas over their US peers given a
combination of USD denominated revenues and euro costs. In
line with our US analyst’s view, we prefer to play US oil and gas
via the mini-majors, where leverage to the oil price is greatest
(Exhibit 7) and potential drags from natural gas and refining
margins are more muted (see Evan Calio, Integrated Oil:
Positioned for Relative Outperformance: Prefer Mini-Majors –
April 16, 2010).
Exhibit 7
Falling Euro = European Oil & Gas Outperformance
The Euro Drives Oil & Gas Relative Performance
-50%
-40%
-30%
-20%
-10%
0%
10%
20%
30%
40%
50%
1980
1983
1986
1989
1992
1995
1998
2001
2004
2007
2010
US / Europe Oil & Gas Relative YoY%
EUR/USD YoY%

Source: Data Stream, Haver, Morgan Stanley Research
Exhibit 8
Get US Oil & Gas Leverage via the Mini Majors
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
*S
U
*N
X
Y
D
N
R
O
X
Y
H
ES
C
V
X
*C
N
Q
M
R
O
M
U
R
C
O
P
X
O
M
PX
P
A
PA
PX
D
*T
LM
W
TI
N
B
L
A
PC
D
V
N
EO
G
M
E
SD
X
EC
N
FX
FS
T
X
TO
R
R
C
C
H
K
C
O
G
B
B
G
EC
A
U
PL
Integrated Avg = 67%
E&P Avg = 35%

Source: Company data, Morgan Stanley Research, Courtesy of Morgan Stanley’s Integrated
Oil Team – Even Calio
We see two key risks to our upgrade. First, near-term downside
to crude prices. Our commodity team believes the recent run in
crude may be slightly overextended. They think the
improvement in product balances has resulted from reduced



5


M O R G A N S T A N L E Y R E S E A R C H
April 19, 2010
Global Equity Strategy
production due to lower refinery runs, not demand. Within the
OECD, demand has stabilized but remains weak and still below
year-earlier levels. With the added fillip of a colder-than-normal
winter now fading, and refiners exiting maintenance, there is a
risk that products don’t lend the support needed to keep crude
prices at current levels.
However, by the second half our commodity team thinks crude
will move sustainably above $80/bbl, ultimately trading up to
$95/bbl by year-end, when inventories are drawing and/or
OPEC increases production (i.e., a reduction in spare capacity).
See Hussein Allidina’s Global Oil Fundamentals, 19 April 2010.
We prefer not to play the sector on the basis of short-term
oscillations in crude. Provided we don’t see a material move
below the low $70 range, we would use any weakness to buy
the sector.
The second key risk is that Energy is likely to struggle during
any correction phase for equities. Our work shows that: 1) it is
rare for Energy to move against the market (i.e., typically
market down = energy down); 2) it is rare for oil and gas to
move against equipment & services (only once in the past 14
years); and 3) there are few diversification benefits from a
regional allocation in Energy between US and Europe. As a
result, an overweight is more likely when accompanied by a
positive view on the market as a whole. However, we are more
comfortable with being overweight Energy into a correction
than being overweight the traditional cyclicals such as
Materials and Consumer Discretionary, where we think
expectations have become optimistic and are more prone to
disappointment. Only Technology is likely to offer greater
downside protection given a relatively defensive earnings mix,
in our view.
Exhibit 9
Global Energy Expectations Conservative?
83%
86%
89%
93%
94%
107% 107% 110%
123%
128%
137%
50%
60%
70%
80%
90%
100%
110%
120%
130%
140%
150%
Energy
Industrials
Financials
Telecom
Cons Disc
Materials
World Ex-
Fin
Utilities
Health Care
Staples
Tech
MSCI World : 2011 Consensus Earnings as a % of all time Peak

Source: Fact Set, World Scope, Datastream, Morgan Stanley Research

Materials: Take Profits
We are taking profits on Materials. We run the risk of fading
the Materials call too early, and our commodity team remains
constructive on most commodities (particularly the bulks,
platinum group metals, copper, and zinc). However, we think
you will get a better entry point to move back overweight
sometime later in the year (potentially in the second half).
Exhibit 10
Mining Not Cheap on Graham-Dodd Measure
Global Mining P/E Ratio
0
10
20
30
40
50
60
1972
1976
1980
1984
1988
1992
1996
2000
2004
2008
2012
Trailing PE
Graham-Dodd PE*
* Based on trailing 10yr earnings (Deflated by
G7 CPI)
Datastream Global Mining Index

Source: Datastream, Morgan Stanley Research
In the near term, we are concerned that: 1) value is already
hard to find; 2) earnings expectations already incorporate a
return to (or close to) peak levels for many commodities by
2011 (nickel and steel are the exceptions); 3) earnings
momentum is rolling over in key industries (Mining and
Chemicals); 4) the market has already become more
discerning on stock selection – Materials have already become
an alpha over beta trade; 5) unlike Energy, Materials do not
historically perform well as leading growth indicators begin to
roll over and as we enter a rate tightening cycle; with limited
valuation appeal and deteriorating earnings revision
momentum, this makes the sector highly vulnerable to any
broader market weakness; 6) continued Chinese policy
tightening and recent measures to rein in property prices, while
not likely to de-rail growth in our view, have the potential to
dampen sentiment towards the commodity related sectors
(construction materials and steel in particular); and 7)
commodity prices well above marginal costs of production
could potentially lead to oversupply.



6


M O R G A N S T A N L E Y R E S E A R C H
April 19, 2010
Global Equity Strategy
Exhibit 11
Consensus Forecasts for Materials Already Put
Earnings 10% Above the Prior Cycle Peak
2011e Earnings
Perf*. Since
% of Prior Peak
Sector Trough
Materials
109%
118%
Chemicals
94%
81%
Fertilizers & Agricultural Chemicals
80%
62%
Diversified Chemicals
80%
98%
Specialty Chemicals
93%
91%
Commodity Chemicals
89%
65%
Construction Materials
59%
79%
Containers & Packaging
127%
72%
Metal & Glass Containers
120%
60%
Paper Packaging
121%
88%
Metals & Mining
118%
173%
Diversified Metals & Mining
133%
222%
Precious Metals & Minerals
182%
280%
Steel
77%
117%
Gold
184%
137%
Aluminum
39%
123%
Paper & Forest Products
70%
70%

Source: MSCI, Factset, Morgan Stanley Research. *Note: Performance for MSCI World IMI
Index
The bulls will argue that as long as growth continues to surprise
on the upside, one should remain overweight. We disagree.
Growth data are catching up to what is already embedded in
earnings expectations in the Western world. We now need to
see additional earnings upside (or greater comfort on China
tightening) in order to remain bullish. Not impossible, but
becoming less likely given 2011 consensus forecasts already
put earnings 10% above the old cycle peak, with commodity
prices that are forecast to reach elevated levels over the
coming 18 months.
Exhibit 12
Materials are the early Reflation Trade
Leading Index & Global Mining Stocks
-12
-9
-6
-3
0
3
6
9
12
15
1987
1990
1993
1996
1999
2002
2005
2008
2011
12M%
-80
-60
-40
-20
0
20
40
60
80
100
120
12M %
G7 Leading Index (LHS)
Global Mining*
* Datastream Index

Source: Datastream, Morgan Stanley Research
Materials (especially Metals and Mining) were part of the early
reflation/risk asset trade. They have underperformed year to
date – surprisingly across all industry groups - as rotation into
late-cycle cyclicals has gathered momentum. We think this
trend will continue as the current commodity cycle plays out
much more selectively than it did through 2003-2007, and as
macroeconomic factors (Fed rate hikes, peak in leading
economic indicators, Chinese policy tightening) drive a shift
towards later-cycle, lower-beta and laggard commodity trades
such as Energy.
Our commodity team thinks that forecast base metal prices are
now fully priced into equities, although they continue to see
some upside for the diversified miners and base metal players.
Global coal equities have a strong M&A bid underpinning price
performance, although again we think this sub-sector is also
fully priced on current commodity price expectations.
Exhibit 13
Industrial Metals Getting up to Prior Peak
Commodity Prices
300
600
900
1200
1500
1800
2100
2400
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
Total Return Indexes
Industrial Metals
Precious Metals
Agriculture
Goldman Sachs Indices

Source: Datastream, Morgan Stanley Research
We are not negative on the entire Materials sector. Base metal
prices, particularly copper and nickel, should remain
reasonably well supported through the liquidity and policy
normalization cycle. Renewed concerns over sovereign risk
could revive investor interest in Gold and Silver, while bulks,
particularly iron ore and metallurgical coal, could rally on rapid
growth in Chinese steel production and demand from Asia and
Europe.
However, we doubt that even the laggard industries such as
Construction Materials (primarily Europe – Holcim, CRM,
Lafarge, Heidelberg Cement) and Chemicals (primarily US –
Monsanto, Dow Chemical, DuPont and Potash) are enough to
drive overall sector outperformance without the contribution of
the key Metals and Mining stocks (such as Anglo American,
Freeport-McMoRan, ArcelorMittal, Xstrata and CVRD) which
dominate the sector.



7


M O R G A N S T A N L E Y R E S E A R C H
April 19, 2010
Global Equity Strategy
Exhibit 14
Base Metals only 17% off the 2008 High
Metal Prices and Mining Stocks
100
150
200
250
300
350
400
2004
2005
2006
2007
2008
2009
2010
Index
120
180
240
300
360
420
480
Index
Base Metals (LHS)
Global Mining Stocks

Source: Datastream, Morgan Stanley Research
At 17x forward earnings, we don’t think Materials valuations
are at an extreme level. However, they are close to the peak of
the prior cycle, and like Energy, we think there is now greater
scope for multiple contraction than expansion. If earnings
expectations prove optimistic and head lower as we expect, it is
highly unlikely that price performance will outstrip consensus
EPS growth of near 200% over the coming 2 years.
Exhibit 15
P/E contraction as ‘E’ catches up….
Global Mining: Price, Earnings and PE
-60
-40
-20
0
20
40
60
80
100
120
140
1974
1978
1982
1986
1990
1994
1998
2002
2006
2010
12M%
PE
EPS
PRICE

Source: Datastream, Morgan Stanley Research
Admittedly it is difficult to get a strong signal from mid cycle
earnings and valuation analysis given the exponential earnings
increase during the last cycle and given that consensus is
forecasting such a rapid return to old earnings highs. However,
based on current consensus estimates, the sector is already
priced on a typical mid cycle multiple (around 14x). Moreover,
this mid cycle valuation uses an EPS level equivalent to the old
peak of $20.
Exhibit 16
Another Earnings Super Cycle in the Making…
Dec-08
20.4
Jan-10
5.7
Dec-11
20.2
0
5
10
15
20
25
1995
1997
1999
2001
2003
2005
2007
2009
2011
MSCI World Materials - Earnings
Trough to Peak EPS
was 76 months
Trough back to prior peak
EPS in 23 months

Source: Datastream, Morgan Stanley Research
We think it is clear that earnings for the Material sector will
reach new peak levels in the current cycle (our issue is with the
timing, not the ultimate level). However, it would be unusual for
P/E expansion to continue from here unless growth rates are
also accelerating. We see no strong reason why the sector
should trade on a mid cycle multiple that is higher than when
earnings were at a similar stage during the prior cycle (i.e., 14x).
This would equate to around 15% upside from the current level
assuming earnings/share do get back to $20 by year-end 2011
(each additional P/E point equates to around 8% upside). We
simply don’t like the near-term risk-reward trade-off.
Exhibit 17
Material Sector Earnings Momentum Slowing
-70%
-50%
-30%
-10%
10%
30%
50%
70%
90%
1996
1998
2000
2002
2004
2006
2008
2010
MSCI World Materials - ERF vs Price Performance
FY2 EFR - 3MMA
Price
Performance -
Y/Y%

Source: MSCI, Fact Set, Datastream, Morgan Stanley Research
Options Strategy: Long Energy Call / Short Materials Call
As an alternative to simply going long Energy and short
Materials in the cash markets, our derivative strategy team in
the US likes buying calls on Energy and selling calls on
Materials (GICS sectors) to position for Energy
outperformance in an up market. Implied volatility on US
Materials (and on Miners in Europe) looks somewhat higher



8


M O R G A N S T A N L E Y R E S E A R C H
April 19, 2010
Global Equity Strategy
versus history than Energy does, making relative pricing
attractive. And on an absolute basis, Materials implied volatility
is above that of Energy, meaning the trade can be done for no
upfront outlay or a net credit.
In the US, a 3-month call struck 5% out-of-the-money in Energy
costs approximately 2.5%, while a similar call can be sold on
the Materials group for roughly 2.8% (indicative). The pair
trade profits if Energy stocks rise and Materials fall, or if Energy
outperforms Materials – but only if both are higher. This fits our
view that Energy is more likely to work in an up market than a
down one. If both sectors fall, the gain is the net 0.3% earned
upfront, while the main risk is that Materials stocks rise while
also outperforming Energy (given the short call, the potential
loss is theoretically unlimited).
Exhibit 18
Materials Volatility Is High versus Energy
3m ATM Vol
3-year Percentile
Region Sector
Absolute
Relative to
Benchmark* Absolute
Relative to
Benchmark*
US
Energy
23%
6%
10%
14%
Materials
24%
7%
14%
40%
Europe Energy
16%
-4%
5%
1%
Mining
34%
14%
13%
17%

* Benchmark is the S&P 500 in the US and SX5E in Europe
Source: Morgan Stanley Research, Morgan Stanley Quantitative and Derivative Strategies
Our derivative strategy team also likes a similar structure in
Europe; they published a note on Energy and Mining on April
15, 2010 (see Equity Derivatives Dynamics – STOXX Sector
Trades: Focus on Commodity Related Sectors for details).

Investing in options is not suitable for all investors. Please see the disclosures
at the end of this report and discuss whether this or any particular options
strategy is suitable with your Morgan Stanley representative. Please direct all
sector and market-specific questions to the coverage analyst and all
options-specific questions to Christopher Metli, Derivative Research
Strategist














Changes to our Recommended Stock List (see page 2)

We are removing Newcrest Mining (NCM.AX, O/A, 34.00AUD),
Centennial Coal (CEY.AX, O/A, 4.40AUD), and Weatherford
International (WFT.N, O/A, $16.28) and adding Saipem, Noble,
and Occidental to our recommended stock list.

Saipem (SPMI.MI, O/A, €28.67) – We like Saipem due to its
significant exposure to MENA onshore revenues (about 30%).
Our analyst, Martin Rats, expects Saipem to benefit from the
$430 billion worth of E&C contracts that are expected to be
awarded by oil companies in the MENA region by 2012.
Additionally, Martin believes that there is upside to Saipem's
offshore revenues as the company is likely to benefit from its
investment in its offshore fleet, which is expected to come
on-line in 2011.

Noble Energy (NBL.N, O/I, $77.32) – After exploration
success over the past 2-3 years, Noble is positioned for
accelerating growth and returns from its three key project areas
(Gulf of Mexico, Israel, West Africa). New projects are oil and
oil-linked international gas. Beyond development projects,
exploration continues apace, with 2010 being the biggest
exploration program in Noble’s history.

Occidental Petroleum Corp. (OXY.N, O/A, $84.69) – We
favor US mini-major integrated names for leverage to crude oil.
Among these companies, we like OXY for its
above-peer-average exposure to crude versus natural gas.
Morgan Stanley’s 2011 earnings estimate of $8.83 is 17%
above the consensus, based on OXY’s high oil exposure,
sustainable upstream growth, and high free cash flow.
Additionally, OXY has 35% upstream EBITDA growth on our
team’s 2011 estimates. Valuation is also attractive, as OXY
trades at 9.6x our 2011 estimates.



9


M O R G A N S T A N L E Y R E S E A R C H
April 19, 2010
Global Equity Strategy
Exhibit 19
Energy Stocks With Positive Earnings Revision Momentum
Ticker
Company
Country
Sub-Industry
Mcap ($m)
Price ($)
Price %
from high
NTM P/E
3 mo. 2011e
Revision
3 mo. 2012e
Revision
MS Rating
BTU
Peabody Energy Corp.
United States
Coal & Consumable Fuels
12,325.8
44.67
-49%
13.0x
16%
23%
O / I
B15C55
Total S.A.
France
Integrated Oil & Gas
122,644.8
57.74
-37%
9.2x
-1%
10%
O / A
713360
Statoil ASA
Norw ay
Integrated Oil & Gas
27,527.3
24.07
-44%
9.6x
-2%
2%
O / A
566935
Repsol YPF S.A.
Spain
Integrated Oil & Gas
17,928.8
24.47
-44%
10.2x
-4%
6%
O / A
079805
BP PLC
United Kingdom
Integrated Oil & Gas
185,506.8
9.83
-26%
8.9x
5%
9%
O / A
B03MM4
Royal Dutch Shell PLC (CL B)
United Kingdom
Integrated Oil & Gas
78,803.7
29.13
-34%
9.3x
-5%
7%
U / A
CVX
Chevron Corp.
United States
Integrated Oil & Gas
162,006.1
80.65
-22%
9.2x
4%
16%
O / A
XOM
Exxon Mobil Corp.
United States
Integrated Oil & Gas
322,483.0
67.96
-29%
10.8x
2%
6%
E / A
HES
Hess Corp.
United States
Integrated Oil & Gas
18,736.3
62.88
-53%
12.6x
-1%
2%
O / A
MUR
Murphy Oil Corp.
United States
Integrated Oil & Gas
10,919.4
59.53
-41%
11.2x
-3%
12%
E / A
OXY
Occidental Petroleum Corp.
United States
Integrated Oil & Gas
69,040.4
84.18
-14%
12.9x
2%
9%
O / A
B09RMQ
Seadrill Ltd.
Norw ay
Oil & Gas Drilling
7,293.9
25.43
-29%
8.4x
2%
0%
O / A
NBR
Nabors Industries Ltd.
United States
Oil & Gas Drilling
5,529.8
19.34
-61%
14.9x
0%
13%
O / A
RDC
Row an Cos. Inc.
United States
Oil & Gas Drilling
3,461.4
30.04
-37%
13.2x
10%
74%
E / A
421539
CGG Veritas
France
Oil & Gas Equipment & Services
4,397.3
30.58
-55%
32.3x
5%
7%
E / A
487416
Technip S.A.
France
Oil & Gas Equipment & Services
8,579.4
82.79
-16%
17.6x
8%
15%
O / A
476876
Saipem S.p.A.
Italy
Oil & Gas Equipment & Services
10,274.5
38.61
-20%
17.5x
9%
15%
O / A
B096LW
Fugro N.V.
Netherlands
Oil & Gas Equipment & Services
4,515.8
67.63
-28%
15.4x
7%
7%
NC
BHI
Baker Hughes Inc.
United States
Oil & Gas Equipment & Services
14,722.7
47.32
-52%
20.0x
3%
4%
O / A
CAM
Cameron International Corp.
United States
Oil & Gas Equipment & Services
10,937.5
44.26
-23%
18.1x
4%
14%
O / A
HAL
Halliburton Co.
United States
Oil & Gas Equipment & Services
28,537.0
31.32
-42%
19.1x
1%
5%
O / A
SLB
Schlumberger Ltd.
United States
Oil & Gas Equipment & Services
79,010.3
64.95
-42%
20.4x
3%
15%
O / A
697972
Woodside Petroleum Ltd.
Australia
Oil & Gas Exploration & Production
23,575.1
42.29
-36%
23.0x
-2%
3%
O / A
*AET.U
Arc Energy Trust
Canada
Oil & Gas Exploration & Production
2,635.7
21.01
-37%
18.8x
4%
18%
NC
*CNQ
Canadian Natural Resources Ltd.
Canada
Oil & Gas Exploration & Production
41,263.1
74.99
-30%
13.0x
0%
21%
O / I
*PBG
Petrobank Energy & Resources Ltd.
Canada
Oil & Gas Exploration & Production
4,579.9
51.09
-19%
12.9x
2%
11%
NC
1662
Japan Petroleum Exploration Co. Ltd.
Japan
Oil & Gas Exploration & Production
1,518.0
51.71
-37%
21.5x
7%
38%
O / I
015008
Tullow Oil PLC
United Kingdom
Oil & Gas Exploration & Production
17,650.8
19.62
-12%
64.8x
13%
25%
O / A
547565
Hellenic Petroleum S.A.
Greece
Oil & Gas Refining & Marketing
1,019.3
10.88
-39%
12.4x
-2%
20%
NC
EP
El Paso Corp.
United States
Oil & Gas Storage & Transportation
7,784.1
11.13
-49%
11.8x
1%
1%
E / A
SE
Spectra Energy Corp.
United States
Oil & Gas Storage & Transportation
14,797.8
22.97
-21%
14.5x
2%
0%
E / A

Source: Factset, Morgan Stanley Research; NC = Not covered. Screening Criteria: 1) Positive earnings revision momentum, 2) Z-score of NTM PE < 1, and 3) Price greater than 10% from 2007 high
Exhibit 20
Materials Stocks with Negative Earnings Revision Momentum and Near-Peak Price & Earnings
Ticker
Company
Country
Sub-Industry
Mcap ($m)
Price ($)
18-Apr-10
Price %
from prior
high
2011e
Earnings %
from Prior
Peak
NTM PE
ERF/NTM
Revisions
MS Rating
3402
Toray Industries Inc.
Japan
Commodity Chemicals
8,204.2
5.9
-28.7%
88.8%
34.2
Falling
NC
641297
James Hardie Industries SE
Australia
Construction Materials
2,865.2
6.6
-17.2%
96.4%
19.9
Falling
NC
FMC
FMC Corp.
United States
Diversif ied Chemicals
4,626.5
64.0
-19.6%
127.7%
13.4
Falling
NC
4021
Nissan Chemical Industries Ltd.
Japan
Diversif ied Chemicals
2,431.4
14.0
-7.3%
99.1%
15.1
Falling
NC
645800
Orica Ltd.
Australia
Diversif ied Chemicals
9,181.6
25.5
-12.3%
129.5%
13.8
Rising
NC
EMN
Eastman Chemical Co.
United States
Diversif ied Chemicals
4,747.8
65.3
-13.9%
90.8%
13.8
Falling
NC
004561
Antofagasta PLC
United Kingdom
Diversif ied Metals & Mining
15,187.6
15.4
-9.5%
126.8%
11.1
Falling
U / I
B29BCK
Eurasian Natural Resources
United Kingdom
Diversif ied Metals & Mining
23,925.1
18.6
-36.2%
80.1%
9.9
Falling
O / I
B0HZPV
Kazakhmys PLC
United Kingdom
Diversif ied Metals & Mining
12,347.5
23.1
-36.3%
104.6%
8.0
Falling
O / I
435664
Syngenta AG
Sw itzerland
Fertilizers & Agri Chemicals
25,316.4
267.6
-18.0%
119.4%
14.7
Falling
E / I
MON
Monsanto Co.
United States
Fertilizers & Agri Chemicals
35,281.4
64.7
-54.0%
106.6%
18.8
Falling
O / A
663710
New crest Mining Ltd.
Australia
Gold
15,528.4
32.1
-15.0%
280.8%
24.2
Falling
O / A
*AEM
Agnico-Eagle Mines Ltd.
Canada
Gold
9,334.3
59.6
-24.3%
208.3%
28.8
Falling
NC
*G
Goldcorp Inc.
Canada
Gold
28,536.3
38.9
-20.7%
86.4%
28.7
Falling
E / I
B01C3S
Randgold Resources Ltd.
United Kingdom
Gold
7,113.4
79.0
-7.2%
585.8%
32.0
Rising
NC
*ELD
Eldorado Gold Corp.
Canada
Gold
7,245.3
13.6
-6.9%
155.4%
33.3
Rising
NC
ARG
Airgas Inc.
United States
Industrial Gases
5,281.1
64.3
-2.0%
108.1%
20.6
Rising
NC
PX
Praxair Inc.
United States
Industrial Gases
26,634.1
86.8
-11.9%
127.8%
18.1
Rising
E / I
B1YXBJ
Air Liquide S.A.
France
Industrial Gases
30,847.8
116.8
-15.7%
107.5%
16.6
Rising
E / I
APD
Air Products & Chemicals Inc.
United States
Industrial Gases
16,096.0
76.0
-27.6%
109.7%
14.3
Falling
O / I
5901
Toyo Seikan Kaisha Ltd.
Japan
Metal & Glass Containers
3,907.1
18.0
-16.7%
123.5%
58.5
Rising
NC
BLL
Ball Corp.
United States
Metal & Glass Containers
5,111.7
54.3
-2.4%
113.1%
12.0
Rising
NC
OI
Ow ens-Illinois Inc.
United States
Metal & Glass Containers
6,059.6
36.0
-38.5%
136.8%
10.0
Falling
NC
*PAA
Pan American Silver Corp.
Canada
Precious Metals & Minerals
2,673.2
24.9
-41.6%
145.9%
19.1
Falling
NC
IFF
International Flavors & Fragrances
United States
Specialty Chemicals
3,991.7
50.5
-4.9%
112.0%
15.5
Falling
U / A
598061
Givaudan S.A.
Sw itzerland
Specialty Chemicals
7,677.0
903.5
-9.8%
132.8%
16.6
Rising
O / A
465853
Novozymes A/S
Denmark
Specialty Chemicals
6,085.2
112.2
-13.3%
125.1%
28.2
Rising
NC
ECL
Ecolab Inc.
United States
Specialty Chemicals
10,756.5
45.3
-13.2%
127.0%
19.7
Rising
NC
SIAL
Sigma-Aldrich Corp.
United States
Specialty Chemicals
6,762.6
55.6
-9.7%
119.5%
17.4
Rising
NC

Source: Factset, Morgan Stanley Research NC = Not covered. Screening Criteria: 1) Falling ERFs/NTM EPS, 2) Z-score of NTM PE > -0.5, 3) Price less than 20% from 2007 high, and 4) 2011
earnings as % of prior peak > 80%. We have assigned equal weights to these criteria and selected stocks that satisfy at least 3 out of the 4 criteria.



10


M O R G A N S T A N L E Y R E S E A R C H
April 19, 2010
Global Equity Strategy
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exchange-traded options, your attention is called to the publication “Characteristics and Risks of Standardized Options;” in particular, the statement
entitled “Risks of Option Writers.” That publication, which you should have read and understood prior to investing in options, can be viewed on the
Web at the following address: http://www.optionsclearing.com/about/publications/character-risks.jsp. Spreading may also entail substantial
commissions, because it involves at least twice the number of contracts as a long or short position and because spreads are almost invariably closed
out prior to expiration. Potential investors should be advised that the tax treatment applicable to spread transactions should be carefully reviewed prior
to entering into any transaction. Also, it should be pointed out that while the investor who engages in spread transactions may be reducing risk, he is
also reducing his profit potential. The risk/ reward ratio, hence, is an important consideration.
The risk of exercise in a spread position is the same as that in a short position. Certain investors may be able to anticipate exercise and execute a
"rollover" transaction. However, should exercise occur, it would clearly mark the end of the spread position and thereby change the risk/reward ratio.
Due to early assignments of the short side of the spread, what appears to be a limited risk spread may have more risk than initially perceived. An
investor with a spread position in index options that is assigned an exercise is at risk for any adverse movement in the current level between the time
the settlement value is determined on the date when the exercise notice is filed with OCC and the time when such investor sells or exercises the long
leg of the spread. Other multiple-option strategies involving cash settled options, including combinations and straddles, present similar risk.
Important Information:
•
Examples within are indicative only, please call your local Morgan Stanley Sales representative for current levels.
•
By selling an option, the seller receives a premium from the option purchaser, and the purchase receives the right to exercise the option at
the strike price. If the option purchaser elects to exercise the option, the option seller is obligated to deliver/purchase the underlying shares
to/from the option buyer at the strike price. If the option seller does not own the underlying security while maintaining the short option
position (naked), the option seller is exposed to unlimited market risk.
•
Spreading may entail substantial commissions, because it involves at least twice the number of contracts as a long or short position and
because spreads are almost invariably closed out prior to expiration. Potential investors should carefully review tax treatment applicable to
spread transactions prior to entering into any transactions.
•
Multi-legged strategies are only effective if all components of a suggested trade are implemented.
•
Investors in long option strategies are at risk of losing all of their option premiums. Investors in short option strategies are at risk of unlimited
losses.
•
There are special risks associated with uncovered option writing which expose the investor to potentially significant loss. Therefore, this
type of strategy may not be suitable for all customers approved for options transactions. The potential loss of uncovered call writing is
unlimited. The writer of an uncovered call is in an extremely risky position, and may incur large losses if the value of the underlying
instrument increases above the exercise price.
•
As with writing uncovered calls, the risk of writing uncovered put options is substantial. The writer of an uncovered put option bears a risk of
loss if the value of the underlying instrument declines below the exercise price. Such loss could be substantial if there is a significant decline
in the value of the underlying instrument.
•
Uncovered option writing is thus suitable only for the knowledgeable investor who understands the risks, has the financial capacity and
willingness to incur potentially substantial losses, and has sufficient liquid assets to meet applicable margin requirements. In this regard, if
the value of the underlying instrument moves against an uncovered writer’s options position, the investor’s broker may request significant
additional margin payments. If an investor does not make such margin payments, the broker may liquidate stock or options positions in the
investor’s account, with little or no prior notice in accordance with the investor’s margin agreement.
•
For combination writing, where the investor writes both a put and a call on the same underlying instrument, the potential risk is unlimited.
•
If a secondary market in options were to become unavailable, investors could not engage in closing transactions, and an option writer would
remain obligated until expiration or assignment.
•
The writer of an American-style option is subject to being assigned an exercise at any time after he has written the option until the option
expires. By contrast, the writer of a European-style option is subject to exercise assignment only during the exercise period.




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Global Equity Strategy
Morgan Stanley, S.V., S.A.U., an affiliate of Morgan Stanley, is acting as financial advisor to Sogecable S.A. in relation to the sale of 21% of its Pay TV business
to Telefonica, S.A. as announced on 25th November 2009.
This report and the information herein are not intended to serve as an endorsement or otherwise of the proposed transaction.
This report was prepared solely upon information generally available to the public. No representation is made that it is accurate and complete. This report is not
a recommendation or an offer to buy or sell the securities mentioned. Please refer to the notes at the end of this report
Morgan Stanley & Co. Limited, an affiliate of Morgan Stanley, is providing advice to AstraZeneca PLC in relation to the acquisition of Novexel, as announced on
23 December 2009.
This report and the information herein are not intended to serve as an endorsement of the proposed transaction.
This report was prepared solely upon information generally available to the public. No representation is made that it is accurate and complete. This report is not
a recommendation or an offer to buy or sell the securities mentioned. Please refer to the notes at the end of this report.
Morgan Stanley is currently acting as financial advisor to Verizon Wireless with respect to the proposed acquisition of certain of its wireless assets by AT&T,
Inc. and Atlantic Tele-Network, as required by the conditions of the regulatory approvals granted for Verizon Wireless' purchase of Alltel Corporation earlier this
year.
The proposed acquisitions are subject to customary regulatory approvals, as well as other customary closing conditions.
Verizon Wireless has agreed to pay fees to Morgan Stanley for its financial services.
Morgan Stanley is currently acting as financial advisor to Comcast Corporation ("Comcast") with respect to its proposed formation of a joint venture with General
Electric Co. ("GE") consisting of the NBC Universal businesses and Comcast’s cable networks, regional sports networks and certain digital properties and
certain unconsolidated investments. Morgan Stanley is also providing financing in connection with this transaction.
The proposed transaction is subject to regulatory approvals and other customary closing conditions.
Comcast has agreed to pay fees to Morgan Stanley for its financial services, including transaction fees and financing fees that are contingent upon the
consummation of the proposed transaction.
Morgan Stanley is acting as financial advisor to General Electric Co., ("GE") in relation to GE’s framework agreement with Mubadala Development Company
("Mubadala") on a global partnership encompassing a broad range of strategic initiatives, including commercial finance, clean energy research and development,
aviation, industry and corporate learning, as announced on July 22, 2008. In addition, Mubadala plans to become one of GE’s top ten institutional investors
through the open market, as conditions allow. Implementation of the framework agreement is subject to negotiation of definitive documents and receipt of
required regulatory approvals.
GE has agreed to pay fees to Morgan Stanley for its financial services, including transaction fees that are subject to the consummation of the proposed
partnership.
Morgan Stanley is currently acting as financial advisor to General Electric Capital Corporation in connection with the proposed sale by it or its affiliates of some
or all of the share capital of GE Capital (Thailand) Limited, Krungsriayudhya Card Co., Ltd.,Tesco Card Services Limited, General Card Services Limited and
Total Services Solutions Plc to Bank of Ayudhya Plc as announced on July 10, 2009.
The proposed transaction is subject to regulatory approvals, the approval of Bank of Ayudhya Plc shareholders and other customary closing conditions. This
report and the information provided herein is not intended to (i) provide voting advice, (ii) serve as an endorsement of the proposed transaction, or (iii) result in
the procurement, withholding or revocation of a proxy or any other action by a security holder.
Please refer to the notes at the end of this report.




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April 19, 2010
Global Equity Strategy
Disclosure Section
The information and opinions in Morgan Stanley Research were prepared by Morgan Stanley & Co. Incorporated, and/or Morgan Stanley C.T.V.M. S.A.
and their affiliates (collectively, "Morgan Stanley").
For important disclosures, stock price charts and equity rating histories regarding companies that are the subject of this report, please see the Morgan
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Analyst Certification
The following analysts hereby certify that their views about the companies and their securities discussed in this report are accurately expressed and
that they have not received and will not receive direct or indirect compensation in exchange for expressing specific recommendations or views in this
report: Jason Todd.
Unless otherwise stated, the individuals listed on the cover page of this report are research analysts.
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Important US Regulatory Disclosures on Subject Companies
As of March 31, 2010, Morgan Stanley beneficially owned 1% or more of a class of common equity securities of the following companies covered in
Morgan Stanley Research: Hess Corporation, Occidental Petroleum, Saipem, Schlumberger, TOTAL, Weatherford International.
As of March 31, 2010, Morgan Stanley held a net long or short position of US$1 million or more of the debt securities of the following issuers covered
in Morgan Stanley Research (including where guarantor of the securities): BP plc, Hess Corporation, Noble Energy, Occidental Petroleum, Saipem,
Schlumberger, TOTAL, Weatherford International, Woodside Petroleum.
Within the last 12 months, Morgan Stanley managed or co-managed a public offering (or 144A offering) of securities of Hess Corporation,
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Within the last 12 months, Morgan Stanley has received compensation for investment banking services from BP plc, Hess Corporation, Noble Energy,
Occidental Petroleum, Schlumberger, Weatherford International, Woodside Petroleum.
In the next 3 months, Morgan Stanley expects to receive or intends to seek compensation for investment banking services from BP plc, Hess
Corporation, Newcrest Mining, Noble Energy, Occidental Petroleum, Saipem, Schlumberger, TOTAL, Tullow Oil, Weatherford International, Woodside
Petroleum.
Within the last 12 months, Morgan Stanley & Co. Incorporated has received compensation for products and services other than investment banking
services from BP plc, Hess Corporation, Noble Energy, Occidental Petroleum, TOTAL, Weatherford International.
Within the last 12 months, Morgan Stanley has provided or is providing investment banking services to, or has an investment banking client
relationship with, the following company: BP plc, Hess Corporation, Newcrest Mining, Noble Energy, Occidental Petroleum, Saipem, Schlumberger,
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An employee, director or consultant of Morgan Stanley is a director of Schlumberger.
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STOCK RATINGS
Morgan Stanley uses a relative rating system using terms such as Overweight, Equal-weight, Not-Rated or Underweight (see definitions below).
Morgan Stanley does not assign ratings of Buy, Hold or Sell to the stocks we cover. Overweight, Equal-weight, Not-Rated and Underweight are not the
equivalent of buy, hold and sell. Investors should carefully read the definitions of all ratings used in Morgan Stanley Research. In addition, since
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and other considerations.
Global Stock Ratings Distribution
(as of March 31, 2010)
For disclosure purposes only (in accordance with NASD and NYSE requirements), we include the category headings of Buy, Hold, and Sell alongside
our ratings of Overweight, Equal-weight, Not-Rated and Underweight. Morgan Stanley does not assign ratings of Buy, Hold or Sell to the stocks we
cover. Overweight, Equal-weight, Not-Rated and Underweight are not the equivalent of buy, hold, and sell but represent recommended relative
weightings (see definitions below). To satisfy regulatory requirements, we correspond Overweight, our most positive stock rating, with a buy
recommendation; we correspond Equal-weight and Not-Rated to hold and Underweight to sell recommendations, respectively.




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April 19, 2010
Global Equity Strategy

Coverage Universe
Investment Banking Clients (IBC)
Stock Rating Category
Count
% of
Total
Count
% of
Total IBC
% of Rating
Category
Overweight/Buy
1042
41%
325
43%
31%
Equal-weight/Hold
1095
43%
348
46%
32%
Not-Rated/Hold
15
1%
4
1%
27%
Underweight/Sell
373
15%
87
11%
23%
Total
2,525

764



Data include common stock and ADRs currently assigned ratings. An investor's decision to buy or sell a stock should depend on individual
circumstances (such as the investor's existing holdings) and other considerations. Investment Banking Clients are companies from whom Morgan
Stanley or an affiliate received investment banking compensation in the last 12 months.
Analyst Stock Ratings
Overweight (O). The stock's total return is expected to exceed the average total return of the analyst's industry (or industry team's) coverage universe,
on a risk-adjusted basis, over the next 12-18 months.
Equal-weight (E). The stock's total return is expected to be in line with the average total return of the analyst's industry (or industry team's) coverage
universe, on a risk-adjusted basis, over the next 12-18 months.
Not-Rated (NR). Currently the analyst does not have adequate conviction about the stock's total return relative to the average total return of the
analyst's industry (or industry team's) coverage universe, on a risk-adjusted basis, over the next 12-18 months.
Underweight (U). The stock's total return is expected to be below the average total return of the analyst's industry (or industry team's) coverage
universe, on a risk-adjusted basis, over the next 12-18 months.
Unless otherwise specified, the time frame for price targets included in Morgan Stanley Research is 12 to 18 months.
For Australian Property stocks, each stock's total return is benchmarked against the average total return of the analyst's industry (or industry team's)
coverage universe, instead of the relevant country MSCI Index, on a risk-adjusted basis, over the next 12-18 months.
Analyst Industry Views
Attractive (A): The analyst expects the performance of his or her industry coverage universe over the next 12-18 months to be attractive vs. the
relevant broad market benchmark, as indicated below.
In-Line (I): The analyst expects the performance of his or her industry coverage universe over the next 12-18 months to be in line with the relevant
broad market benchmark, as indicated below.
Cautious (C): The analyst views the performance of his or her industry coverage universe over the next 12-18 months with caution vs. the relevant
broad market benchmark, as indicated below.
Benchmarks for each region are as follows: North America - S&P 500; Latin America - relevant MSCI country index or MSCI Latin America Index;
Europe - MSCI Europe; Japan - TOPIX; Asia - relevant MSCI country index.
.
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Global Equity Strategy
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