Even driving the global recovery. While we’re not so sure about that, earnings growth in emerging markets sure promises to be good…

Morgan Stanley: Big Foreign Stock Rebound
Wednesday, November 11, 2009 9:49 AM
By: Julie Crawshaw

According to Morgan Stanley, emerging markets will likely rebound spectacularly, attracting substantial fund flows going forward.

Earnings growth could be 40 percent just in the company’s base case.

Morgan Stanley’s bear market scenario calls for a 15 percent earnings increase, while its bull market projection is 50 percent.

“Economies and earnings are recovering and it is likely too soon in the cycle for a major peak in emerging-market equities,” Jonathan Garner, Morgan Stanley’s chief Asian and emerging-market strategist, wrote in a recent report.

“However, we do face the headwinds of monetary policy tightening and a higher oil price.”

Emerging markets have led the rally in global stocks this year, making up all 10 best performers among the 89 country benchmarks tracked by Bloomberg.

The MSCI index for 22 developing nations has climbed 65 percent in the year, its best annual performance since 1993, while the MSCI Asian excluding Japan index has rallied 60 percent during the same period.

Morgan Stanley analysts aren’t alone in emerging market growth expectations.

HSBC, Europe’s biggest bank, also forecasts that emerging markets will lead the global economic recovery, noting that the “biggest jolt” of the world financial crisis was over, AFP reports.

In a trading update, HSBC CEO Michael Geoghegan predicted emerging markets would “drive the global recovery”, while the group said third-quarter profits were “significantly” ahead of one year earlier.