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Morgan Stanley raises EMs’ target by 8%, India in most preferred list


Mumbai: Morgan Stanley has raised its December 2019 target for MSCI Emerging Markets Index by 8 per cent, citing aggressive China stimulus, a longer pause by the US Federal Reserve, positive signs for US-China trade negotiations and inclusion of China A shares in the index.

The global investment bank hinted that funds could shift to emerging markets in coming days from developed markets.

Brazil, China, India, Indonesia and Singapore are the most preferred markets for Morgan Stanley while the bank is underweight on Australia, Mexico and the Philippines.

Emerging market indices have been strong so far this year, generating a total return of 8.3 per cent but underperformed the MSCI Developed Markets, which gained 9.8 per cent during this period.

“Looking forward, we see the potential for ongoing investor flows towards EM equities incrementally boosted by MSCI inclusion factor increases and the set up for a further rally as the impact of China stimulus broadens across the region,” Morgan Stanley said in a note.

Elections in various emerging markets are closely monitored as they will also influence the performance of the markets, said Morgan Stanley.

“Elections also loom large as a catalyst for second quarter of 2019, and while pre-election fiscal spending is helping support domestic demand (particularly in India and Indonesia), they will bear close monitoring, particularly in a tight contest in Thailand, and with polls pointing to a potential change of government in Australia,” according to the note.

In a separate report, the global investment bank said Indian equities are beginning to get optimistic on polls.

“The market could start pricing in a stronger election outcome in the coming weeks, causing the Nifty to break its fourmonth range to the upside. The broad market will likely outperform a rising Nifty,” the report said.





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