Morgan Stanley Garner Says Emerging Stocks Are ‘Secular Bull Market’
June 11 (Bloomberg) -- Emerging markets may offer the only “secular bull-market” among global stocks, led by economic and earnings growth in China, Morgan Stanley said.
The rally in developing markets will be driven over the longer term by signs of strengthening economic recovery and higher commodity prices, said Jonathan Garner, Morgan Stanley’s chief Asian and emerging-markets strategist.
The MSCI Emerging Markets Index has rallied 39 percent this year, outpacing a 7.3 percent increase in the MSCI World Index. Developing countries account for all 10 of the world’s best- performing markets.
“Asia excluding Japan and emerging markets are the parts of global equities that we expect to do best,” Garner said in an interview with Bloomberg Television in Hong Kong. “I’d almost go as far as to say that this is the only secular bull market that exists in global equities.”
Garner last week said he’s placing his year-end price target of 810 for the MSCI Emerging Markets Index under review as he weighs an improving outlook for the economy and earnings against “contrarian” indicators, including a flood of money into mutual funds that signal stocks are poised to retreat.
Any increase in the target will be the first in 18 months, he said in a June 4 report.
Earnings Recession
“Asia and other emerging markets increasingly are driving the global economy and their share of GDP has risen throughout the crisis,” Garner said today. “The earnings recession that we’re getting in Asian emerging markets is far smaller than that of the developed world.”
This year’s rebound has returned valuations to more “reasonable” levels, he said. The MSCI Emerging Markets Index is valued at 15 times reported earnings, compared with its five- year average of 13 times. The measure is also trading at 1.8 times book value, rebounding from a low of 1.1 times reached in October, when it tumbled to a four-year low.
“What happened was a sell-off last year that was way overdone,” Garner said. “A lot of the rally we’ve had this year is simply normalizing back on those valuations to a more reasonable level.”
China’s economy is showing signs of improvement, Garner said, adding that Morgan Stanley expects gross domestic product to grow 7 percent this year and 8 percent in 2010. He’s joined by Stephen Ma, a fund manager at Fidelity International, who said yesterday China’s economic outlook is the “brightest” in Asia and growth may exceed investor expectations.
Property Rebound
A rebound in property sales and real-estate prices will help drive a recovery, the Morgan Stanley strategist added.
Property sales rose 45.3 percent in the first five months to 1 trillion yuan ($146 billion) from a year earlier, the statistics bureau said yesterday.
“We can maybe look for a property, construction cycle to get going again,” Garner said. “The whole domestic economy in China is really important not only to rebalance China itself but to help global demand.”
The brokerage is “overweight” in China and favours real- estate, telecommunications, banks, railway and consumer shares, he added.
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Morgan Stanley Garner Says Emerging Stocks Are ‘Secular Bull Market’
June 11 (Bloomberg) -- Emerging markets may offer the only “secular bull-market” among global stocks, led by economic and earnings growth in China, Morgan Stanley said.
The rally in developing markets will be driven over the longer term by signs of strengthening economic recovery and higher commodity prices, said Jonathan Garner, Morgan Stanley’s chief Asian and emerging-markets strategist.
The MSCI Emerging Markets Index has rallied 39 percent this year, outpacing a 7.3 percent increase in the MSCI World Index. Developing countries account for all 10 of the world’s best- performing markets.
“Asia excluding Japan and emerging markets are the parts of global equities that we expect to do best,” Garner said in an interview with Bloomberg Television in Hong Kong. “I’d almost go as far as to say that this is the only secular bull market that exists in global equities.”
Garner last week said he’s placing his year-end price target of 810 for the MSCI Emerging Markets Index under review as he weighs an improving outlook for the economy and earnings against “contrarian” indicators, including a flood of money into mutual funds that signal stocks are poised to retreat.
Any increase in the target will be the first in 18 months, he said in a June 4 report.
Earnings Recession
“Asia and other emerging markets increasingly are driving the global economy and their share of GDP has risen throughout the crisis,” Garner said today. “The earnings recession that we’re getting in Asian emerging markets is far smaller than that of the developed world.”
This year’s rebound has returned valuations to more “reasonable” levels, he said. The MSCI Emerging Markets Index is valued at 15 times reported earnings, compared with its five- year average of 13 times. The measure is also trading at 1.8 times book value, rebounding from a low of 1.1 times reached in October, when it tumbled to a four-year low.
“What happened was a sell-off last year that was way overdone,” Garner said. “A lot of the rally we’ve had this year is simply normalizing back on those valuations to a more reasonable level.”
China’s economy is showing signs of improvement, Garner said, adding that Morgan Stanley expects gross domestic product to grow 7 percent this year and 8 percent in 2010. He’s joined by Stephen Ma, a fund manager at Fidelity International, who said yesterday China’s economic outlook is the “brightest” in Asia and growth may exceed investor expectations.
Property Rebound
A rebound in property sales and real-estate prices will help drive a recovery, the Morgan Stanley strategist added.
Property sales rose 45.3 percent in the first five months to 1 trillion yuan ($146 billion) from a year earlier, the statistics bureau said yesterday.
“We can maybe look for a property, construction cycle to get going again,” Garner said. “The whole domestic economy in China is really important not only to rebalance China itself but to help global demand.”
The brokerage is “overweight” in China and favours real- estate, telecommunications, banks, railway and consumer shares, he added.
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