Morgan Stanley: The Next Ten Years are "The Decade of Emerging Markets"

Morgan Stanley remains bullish on emerging markets, stating that the Fed rate cut and the weakening dollar have opened the door for emerging market stocks to outperform US stocks.

According to Bloomberg on Wednesday, Jitania Kandhari, Deputy Investment Director for Emerging Markets and Head of Macroeconomic Research at Morgan Stanley, stated that the US economic growth and high interest rates had previously favored the dollar, but now these two factors have peaked and are starting to benefit markets outside the US , with the "macro overall fundamentals of emerging markets looking good".

Kandhari insists that this decade is the "decade of emerging markets", even if the performance is sometimes not as satisfactory.

As of September 23, the MSCI Emerging Markets Index has risen by 11% year-to-date, lagging behind the S&P 500 Index for the sixth consecutive year, which has risen by over 20% this year.

"I remain constructive," Kandhari said, "I believe that emerging markets are the best-performing asset class of this decade."

Kandhari stated that previously, due to the Fed tightening policy faster, the interest rate differential between the US and other countries favored the dollar, a series of fiscal policies implemented by the federal government stimulated rapid economic growth in the US, also benefiting the dollar. Kandhari believes that a 4% yield on 10-year US Treasury bonds is a reasonable level, which is "quite a good environment for emerging market assets".

Kandhari also mentioned that after the Fed rate cut, emerging market central banks that have been on the sidelines so far will have less constraints on rate cuts.

A previous article by Wall Street News mentioned that the Fed's first significant rate cut in four years sent a dovish signal to central banks in emerging market countries, with optimistic prospects for Southeast Asian markets. Over the past two months, fund managers have continued to increase holdings of sovereign bonds in Thailand, Indonesia, and Malaysia. And for the past three months, they have been net buyers of stocks in Indonesia, Malaysia, and the Philippines.

Meanwhile, driven by optimistic economic outlook and the Fed rate cut, foreign resources continue to flow into the Indian stock market, with the benchmark Nifty 50 index briefly surpassing the 26,000-point mark on Tuesday, hitting a new all-time high