Japan and India to lead Asia, emerging market equities
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Morgan Stanley expects GDP and EPS growth to again beat expectations in Japan and India and miss in China and emerging markets (EM) in 2024.
“We trim our MSCI EM target again to 1,000 (4 per cent upside), with our previously below-consensus earnings forecasts lowered by another 5 per cent across 2023-25. Key headwinds include the slowing global growth backdrop, higher interest expense burdens and further weakness in key EM exchange rates against the USD-denominated index," said a Morgan Stanley report.
China is likely to continue struggling with debt-deflation challenges.
"Our economists are below-consensus on GDP growth (4.2 per cent real GDP and 4.8 per cent nominal GDP growth in 2024), while our FX team expect CNY/ USD to weaken to 7.5 over 1H24. This keeps us substantially below consensus on EPS growth for a fourth year running and we look for a muted 5 per cent return for MSCI China and 7 per cent for CSI300 in 2024.
“In stark contrast, our team forecasts Indian nominal GDP growth at 11.6 per cent in 2024 and 11.2 per cent in 2025, with a young demographic and geopolitical alignment driving inflows and reducing the cost of equity," the report said.
Japan has convincingly emerged from three decades of economic stagnation (although it exited deflation in 2013, growth had been lacking), while seeing an acceleration in corporate reform.
India has delivered strong relative earnings, sustaining the strong market outperformance seen in 2022, while macro-fundamentals have withstood a sharp tightening in US financial conditions, the report said.
