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Morgan Stanley ups emerging markets 2019 target; says, pre-election spend in India assisting domestic demand

Ashish Pandey

MSCI Emerging Markets Index is likely to rise by 8 per cent by year-end on account of additional stimulus from China, longer pause by US Federal Reserve, the inclusion of China A shares in the index, among other factors, Morgan Stanley said in a report. While Brazil, China, India, Indonesia and Singapore are the most preferred markets, Australia, Mexico and the Philippines are the underweights for the bank on the global benchmark.

Even as the target for MSCI Emerging Markets Index has been raised to 1,130 from 1,050, MSCI Asia ex-Japan index target has been hiked by 3 per cent to 540.

As Chinese stocks lead the recovery in the emerging markets this year, it has turned more bullish on the Chinese shares, the global investment bank noted.

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The upcoming general elections in India, Thailand, Indonesia, South Africa, the Philippines and Australia will loom large in the first quarter of FY20, it added. “Elections also loom large as a catalyst for 2Q, and while pre-election fiscal spending is helping support domestic demand (particularly in India and Indonesia), they will bear close monitoring…”, the report stated.

The oil price may break higher undermining both corporate and household spending power in emerging markets and pose a challenge for monetary policy, it noted.

Meanwhile, the Sensex extended its rally on the second day of the week by opening higher by 275 points at 37,329.46, while the Nifty was trading near the 11,250-mark amid strong global and domestic cues.