(Bloomberg) -- Taiwan Semiconductor Manufacturing Co. surged the most in almost three months after Morgan Stanley projected a return to growth for the semiconductor industry by the second half of 2023, spurring a sector rally in Asia. 

The investment bank crowned TSMC -- Asia’s most valuable listed corporation -- a top pick, calling it “an enabler of future technology.” TSMC gained 3.7% in Taipei, while memory chipmaker SK Hynix Inc. jumped 4.2%.

Global chipmakers had been riding high during the pandemic, when work-from-home fueled demand for computers and other consumer electronics. But inflation and recession fears -- plus a return to the office -- have put a damper on purchases. In response, memory chipmakers such as Micron Technology Inc. and Kioxia Holdings Corp. have slashed output to try to prop up prices.

TSMC, however, is in a different position. As the world’s most advanced logic chipmaker, it should benefit as industry demand begins to climb back next year, Morgan Stanley analysts wrote. The US investment bank also upgraded Korean technology and Chinese chip sector to “attractive.”

“We are well advanced in the current cyclical downturn from where global semiconductor shipment units peaked around September last year,” the analysts wrote in a research report. “We are not calling for the beginning of a new cycle but acknowledge that an inflection (bottom) is closer.”

In a separate report, Morgan Stanley also upgraded emerging-market stocks to overweight from equal weight, saying it’s likely a bottom is near. 

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