The bear market may be over, but Morgan Stanley does not see catalysts that could trigger a multi-year bull run.
Speaking to the media last week, its global macro strategist Gerard Minack said that historically, multi-year bull runs started from very cheap valuations. But that is not the case now, as Western markets have already priced in a V-shape economic recovery.
Mr. Minack was speaking on the sidelines of Morgan Stanley Asia-Pacific Summit at the Mandarin Oriental hotel.
A bull run is only sustainable if underpinned by sustainable economic expansion, he said. And Morgan Stanley does not think this will happen.
Indeed, Mr. Minack also said that structural risks such as rising debt, fuelled by massive public sector borrowing, are still present, while aggregate savings in the US have fallen.
Still, he sees value in big caps and quality stocks, saying these counters could enjoy a surge in interest not seen in the recent rallies.
‘In Western markets, the recent rally has been led by junk,’ instead of ‘the big, liquid blue chips stocks’ that present the best value in terms of cost and earnings growth.
Looking at Asia and global emerging markets, Morgan Stanley’s chief emerging markets strategist Jonathan Garner said markets and earnings are recovering well, but there are major headwinds that could move the markets sideways.
The first is the forecast monetary tightening in Asia, particularly in Korea, Taiwan and India, while higher oil prices will dent any market performance.
Valuations are neither expensive nor cheap, and Morgan Stanley predicts a 28 per cent upside for the MSCI Emerging Markets Index from current levels.
At country level, it likes China, saying stocks there deserve a premium to what they are trading at now.
In terms of sectors, Morgan Stanley likes energy, financials and consumer discretionary in the low-debt, faster-growing emerging markets of China, India, Brazil and Indonesia.
It has downgraded IT to equal weight on valuations and its historical sensitivity to global rate hike cycles.
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Morgan Stanley rules out multi-year bull runs
No sustainable economic expansion for support
By OH BOON PING
23 November 2009
The bear market may be over, but Morgan Stanley does not see catalysts that could trigger a multi-year bull run.
Speaking to the media last week, its global macro strategist Gerard Minack said that historically, multi-year bull runs started from very cheap valuations. But that is not the case now, as Western markets have already priced in a V-shape economic recovery.
Mr. Minack was speaking on the sidelines of Morgan Stanley Asia-Pacific Summit at the Mandarin Oriental hotel.
A bull run is only sustainable if underpinned by sustainable economic expansion, he said. And Morgan Stanley does not think this will happen.
Indeed, Mr. Minack also said that structural risks such as rising debt, fuelled by massive public sector borrowing, are still present, while aggregate savings in the US have fallen.
Still, he sees value in big caps and quality stocks, saying these counters could enjoy a surge in interest not seen in the recent rallies.
‘In Western markets, the recent rally has been led by junk,’ instead of ‘the big, liquid blue chips stocks’ that present the best value in terms of cost and earnings growth.
Looking at Asia and global emerging markets, Morgan Stanley’s chief emerging markets strategist Jonathan Garner said markets and earnings are recovering well, but there are major headwinds that could move the markets sideways.
The first is the forecast monetary tightening in Asia, particularly in Korea, Taiwan and India, while higher oil prices will dent any market performance.
Valuations are neither expensive nor cheap, and Morgan Stanley predicts a 28 per cent upside for the MSCI Emerging Markets Index from current levels.
At country level, it likes China, saying stocks there deserve a premium to what they are trading at now.
In terms of sectors, Morgan Stanley likes energy, financials and consumer discretionary in the low-debt, faster-growing emerging markets of China, India, Brazil and Indonesia.
It has downgraded IT to equal weight on valuations and its historical sensitivity to global rate hike cycles.
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