Outside of China, the emerging markets story is a good one. It’s all systems go towards recovery from roughly four years of sluggish growth and – in Brazil and Russia – a recession.
Of the top 21 emerging market economies measured by Morgan Stanley, 14 are now growing, two are stabilizing and growth in five countries is slowing. Sixteen emerging markets have reported first quarter data and the aggregate GDP growth of these countries has risen to 3%, the strongest pace of growth in three years, and double the trough growth rate of 1.6% in the second quarter of 2015. The recovery in growth has been felt in both consumption and investment growth, Morgan Stanley’s chief Asia economist Chetan Ahya said.
“The common push back we get on our constructive view on emerging markets ex-China is that the recovery has been mainly driven by an improving China growth trajectory and rise in commodity prices,” he notes. Many global investors look at China demand for raw materials as an indicator of economic growth potential for countries like Brazil. “We don’t expect a sharp slowdown in China and both emerging market commodity-exporting countries as well as importing countries have been recovering in recent quarters.”
Morgan Stanley fixed income strategists Gordian Kemen sees buying opportunities in Mexico, Poland and Indonesia local currency bonds, and likes the sovereign (dollar-denominated) bonds in Argentina and Ukraine. Within the emerging markets currency space, Morgan strategist James Lord likes the Mexican peso, Indonesian rupiah, Poland and Myanmar currencies. On the equity side, Morgan strategist Jonathan Garner is actually underweight emerging market equities in aggregate, but that is only because he thinks valuations have gotten stretched. Within emerging, his preferred markets are India (INDA 50,11 -0,27 -0,53%) and China (MCHI 36,52 +0,48 +1,33%), and he is not a big fan of South Africa (EWZ 31,83 -0,59 -1,82%).
Recently, Catherine LeGraw, member of the Asset Allocation Team at mutual fund company GMO said emerging markets were her favorite asset class. She spoke with RIA Channel CEO Julie Cooling about the fund’s global macro outlook for the rest of the year. The U.S. equity market is GMO’s least favorite asset class. See her video interview here. Morgan Stanley Says Emerging Market Recovery Intact
Outside of China, the emerging markets story is a good one. It’s all systems go towards recovery from roughly four years of sluggish growth and – in Brazil and Russia – a recession.
Of the top 21 emerging market economies measured by Morgan Stanley, 14 are now growing, two are stabilizing and growth in five countries is slowing. Sixteen emerging markets have reported first quarter data and the aggregate GDP growth of these countries has risen to 3%, the strongest pace of growth in three years, and double the trough growth rate of 1.6% in the second quarter of 2015. The recovery in growth has been felt in both consumption and investment growth, Morgan Stanley’s chief Asia economist Chetan Ahya said.
“The common push back we get on our constructive view on emerging markets ex-China is that the recovery has been mainly driven by an improving China growth trajectory and rise in commodity prices,” he notes. Many global investors look at China demand for raw materials as an indicator of economic growth potential for countries like Brazil. “We don’t expect a sharp slowdown in China and both emerging market commodity-exporting countries as well as importing countries have been recovering in recent quarters.”
Morgan Stanley fixed income strategists Gordian Kemen sees buying opportunities in Mexico, Poland and Indonesia local currency bonds, and likes the sovereign (dollar-denominated) bonds in Argentina and Ukraine. Within the emerging markets currency space, Morgan strategist James Lord likes the Mexican peso, Indonesian rupiah, Poland and Myanmar currencies. On the equity side, Morgan strategist Jonathan Garner is actually underweight emerging market equities in aggregate, but that is only because he thinks valuations have gotten stretched. Within emerging, his preferred markets are India (INDA 50,11 -0,27 -0,53%) and China (MCHI 36,52 +0,48 +1,33%), and he is not a big fan of South Africa (EWZ 31,83 -0,59 -1,82%).
Recently, Catherine LeGraw, member of the Asset Allocation Team at mutual fund company GMO said emerging markets were her favorite asset class. She spoke with RIA Channel CEO Julie Cooling about the fund’s global macro outlook for the rest of the year. The U.S. equity market is GMO’s least favorite asset class. See her video interview here.