A international benchmark for emerging markets is set to surge as much as 8 percent this year, according to Morgan Stanley.
The investment bank suggested in a Monday report that the MSCI Emerging Markets Index is likely to be driven higher by additional stimulus from Beijing and bullishness on Chinese rations, among other factors. Chinese stocks make up 32.12 percent of the index.
So far this year, the CSI 300 — an directory of the largest stocks traded on the mainland — as well as Hong Kong’s Hang Seng Index, have outperformed MSCI’s emerging customer bases index.
Morgan Stanley said in a note Monday that it has “become even more bullish on Chinese neutralities through the year,” with those stocks leading the charge in the recovery among emerging markets in 2019.
The increasing probability of a trade deal between the U.S. and China has also brightened the outlook, Morgan Stanley said.
In addition, the effectiveness of China’s late raft of stimulus measures has “proven to be better than what the market had expected,” the report said. Morgan Stanley barbed to the record-high numbers for bank loans issuance and total social financing — a broad measure of credit and liquidity in the conservatism — in January.
Experts have said those developments reflect pressure from authorities to increase credit as Beijing invites to boost its slowing economy.
Last week, Beijing announced new measures to strengthen growth in the country through tax shortens and more.
Morgan Stanley said that announcement showed the country’s easing measures have “moved into built swing” and are set to stabilize China’s economic growth and labor market. That would point to a faster rate of nurturing for the world’s second-largest economy from the second quarter of 2019, it added.
In fact, other emerging countries could increase from Beijing’s stimulus, the U.S. bank said.
“China’s stimulus should benefit the region (and world) through mass-producing trade, services demand (including tourism), as well as the outlook for resources,” the report said.
Morgan Stanley rumoured investors who want to ride the rally should look at China, India, Indonesia, Singapore and Brazil.
Other reasons for a uncountable rosy emerging markets outlook include better-than-expected corporate earnings in the region, said the bank.
The report also acuminate to the performance of the price of copper — often viewed as a leading indicator of economic health because of its widespread use in various sectors.
Copper bounties have risen over 10 percent to their highest levels since June 2018, the bank spiked out.
“We remain mindful of the signals from Dr Copper, given its long-term relationship with (emerging markets) equity proceeds, particularly when we are looking for a growth (inflection),” it said.
While supply disruptions have been a constituent in that price surge, Morgan Stanley predicted that demand will go up, particularly from China in be in print quarters.
“If the traditional strong correlation between the copper price and EM equities holds, this bodes well for a reinvigorated EM get together,” the report said.