China to top global equity market performance in 2023: Morgan Stanley IG News

New Delhi: Morgan Stanley has raised price targets and expects China to be the top performer in global equity markets in 2023.

“We see a further strong growth recovery ahead of 1Q23 amid rapid reopening, strong housing support and technical regulatory easing, boosting 2023 GDP by 5.7 per cent and 12m USDCNY to 6.65. With structural improvements on ERP and ROE, in our view, China is poised to become the top global equity market performer in 2023. Raise price target and reiterate OW,” Morgan Stanley said.

“We remain OW MSCI China and raise our base case target from 70 to 80 at the end of 2023 (+16 percent by the end of January 5, 2023). China’s equities are poised to lead global equity markets, significantly outperforming regional (EM composite and Japan) and global (S&P) peers.

The current situation equates to late 2008/early 2009, in our view, with many investors insufficiently likely to be a significant cross-asset portfolio alpha driver for 2023. Strong GDP growth and earnings growth prospects from a very low base, as well as reduced domestic policy risk internally and geopolitical risk externally, drive our new forward P/E target of 11.5x (still 5 years 0.4 sd below (0.4 sd below) a re-rating is likely to be granted. ), the report said.

China’s ongoing constructive reappraisal of equity risk premium and a substantial ROE recovery over the next two years are key structural developments we expect, but have yet to be fully appreciated by the market.

“We believe the market is appreciating the far-reaching effects of reopening and the likelihood that a strong cyclical correction could follow,” Morgan Stanley said.

“We expect GDP growth and consumption to pick up to new trend growth largely by 2H23, though not return to the pre-Covid path – first supported by additional savings, and later by jobs and incomes by improvement. Meanwhile, we believe countercyclical easing will persist in 1H23, with public capital expenditure continuing to strengthen, while more housing easing could lead to an earlier stabilization in housing investment. Economic, regulatory and COVID policies are aligned for the first time in four years, which could result in strong spillovers from existing and upcoming easing.


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