According to a report from Morgan Stanley, there are divergent projections for GDP and EPS growth across different regions in 2024.
The report anticipates that Japan and India will surpass expectations in terms of GDP and earnings per share (EPS) growth. Japan, particularly, has shown a convincing departure from three decades of economic stagnation, having notably accelerated corporate reforms after a prolonged period of subdued growth.
India's strong relative earnings and robust market performance in 2022 have positioned it well, with sustained macro-fundamentals that have endured significant tightening in US financial conditions.
Contrastingly, China and emerging markets (EM) are expected to face challenges. China, in particular, is foreseen to grapple with debt-deflation issues. The report projects below-consensus GDP growth for China, with expectations of weakening in the CNY/USD exchange rate during the first half of 2024. This outlook contributes to subdued EPS growth projections for both MSCI China and CSI300 in 2024.
Overall, the report trims the MSCI EM target and revises down earnings forecasts, citing a combination of factors including a slowdown in global growth, increased interest expense burdens, and continued weakness in key EM exchange rates against the USD-denominated index.
India, with anticipated nominal GDP growth rates of 11.6% in 2024 and 11.2% in 2025, benefits from a younger demographic and geopolitical alignment, factors contributing to increased inflows and reduced equity costs. These factors underline a more positive outlook for India compared to the subdued forecasts for China and some other emerging markets.
(With Agency Inputs)
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