Morgan Stanley bullish on EMs including India as inflation peaks

Morgan Stanley expects 2023 to be positive for emerging markets (EMs) because there would be lower inflation, US Fed rate hikes will end and the US dollar should ease. Speaking to CNBC-TV18, from the sidelines of the 21st Asia Pacific Investors’ Conference, Jonathan Garner, Chief Asia and EM Equity Strategist at the multinational investment management and financial services firm said that India is particularly attractive for foreign funds currently.

In a recent report, the investment firm said that the worst of inflation may be over for Asian countries.

Morgan Stanley is currently underweight on India but Garner recognises the opportunity and added that the firm may move money from other markets to park in India.

“Because this is, to some extent, a target-rich environment and we can upgrade Korea and Taiwan with high conviction here, we are underweight India, tactically, but we were not ignoring the strategic bull case long-term,” Garner said.

Market veteran Ridham Desai in his recent paper, India Blue Paper' alluded to this saying that the long-run opportunities are attracting inward foreign direct investment (FDI). One of the positives he points out is the long-run demographic effect on the market of having a young population.

"Indian financials are clearly differently positioned than for example, Korean or Taiwan or China financials. We are not focused on financials in those markets where you do not have such positive tailwinds,” he said.