Morgan Stanley official said that inflationary pressures will be a key concern in emerging markets with a double dip being the major risk they may face. However, emerging markets such as China and India would be able to survive all kinds of global turbulences.
Mr Jonathan Garner MD and chief Asian and Emerging Market Strategist of Morgan Stanley told reporters that "We expect emerging markets like India and China will be able to survive all kinds of global turbulences. Currently, India's GDP growth is seen at 9% and that of China at 11%. India has been downgraded to equal weight from over-weight China. However, the India market is cheap on a relative basis to other emerging markets.”
Presently, the gross domestic product forecast in emerging markets is at around 8%.
Mr Garner said the Chinese market is getting very cheap on a relative basis to the rest of emerging markets and certainly to India. He said that "We expect that market will do substantially better in the second-half of the year.”
Besides, the global financial services firm screened five Indian companies Larsen & Toubro, HUL, RIL, Sun Pharmaceuticals and TCS as the best in their business models framework.
These five companies were chosen for their attractive business models in other words, firms that have a high return on invested capital over the cycle relative to their peers.
On global recession, Mr Garner said that it would have to be a double-dip back into a global recession. He said that "However, that is a long way from our forecasts. But if you look at the valuation level that we are at now, it can only be considered to be accurate if one is expecting earnings to collapse in second-half of this year, which is not our forecast."
Mr Garner further said that "We think that the market right now is pricing in about negative 15% earnings growth for emerging markets for this year, while we expect something like 40% and the first-half has been strong. The market has got to a point where it is pricing-in economic collapse in the second-half of the year which we think is very unlikely.”
(Sourced from Expressindia.com)
