Morgan Stanley says emerging markets investors are set for strong gains

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HANGZHOU, CHINA - AUGUST 07: An investor watches the electronic board at a stock exchange hall on August 7, 2018 in Hangzhou, Zhejiang Province of China. Chinese shares rebounded on Tuesday, with the benchmark Shanghai Composite Index rose 74.21 points, or 2.74 percent, to close at 2,779.37. The Shenzhen Component Index rose 251.19 points, or 2.98 percent, to 8,674.03.

VCG | Visual China Group | Getty Images

HANGZHOU, CHINA – AUGUST 07: An investor watches the electronic board at a stock exchange hall on August 7, 2018 in Hangzhou, Zhejiang Province of China. Chinese shares rebounded on Tuesday, with the benchmark Shanghai Composite Index rose 74.21 points, or 2.74 percent, to close at 2,779.37. The Shenzhen Component Index rose 251.19 points, or 2.98 percent, to 8,674.03.

A global benchmark for emerging markets is set to surge as much as 8 percent this year, according to Morgan Stanley.

MSCI Emerging Markets Index is likely to be driven higher by additional stimulus from Beijing and bullishness on Chinese shares, among other factors. Chinese stocks make up 32.12 percent of the index.

So far this year, the CSI 300 — an index of the largest stocks traded on the mainland — as well as Hong Kong’s Hang Seng Index, have outperformed MSCI’s emerging markets index.

Morgan Stanley said in a note Monday that it has “become even more bullish on Chinese equities through the year,” with those stocks leading the charge in the recovery among emerging markets in 2019.

The increasing likelihood of a trade deal between the U.S. and China has also brightened the outlook, Morgan Stanley said.

In addition, the effectiveness of China’s recent raft of stimulus measures has “proven to be better than what the market had expected,” the report said. Morgan Stanley pointed to the record-high numbers for bank loans issuance and total social financing — a broad measure of credit and liquidity in the economy — in January.

Experts have said those developments reflect pressure from authorities to increase credit as Beijing seeks to boost its slowing economy.

Source: CNBC

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