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Sunday, 29 January 2023

Morgan Stanley is wagering on a roaring ‘20s for emerging markets

Are the 2020s set to be the decade of emerging markets? Morgan Stanley Investment Management last week said it is pulling money out of the US stock market and putting it into equities in developing economies. “Every decade, there is a new leader in the market. In the 2010s, it was US stocks and mega-cap tech … Leaders of this decade can clearly be emerging-market and international stocks,” the fund’s deputy CIO and head of EM macro research, Jitania Kandhari, told Bloomberg.

EM have certainly gotten off to a good start this year: EM stocks and bonds are seeing near-record inflows as investor optimism returns on the back of falling inflation and China reopening following three years of covid lockdowns, according to the Financial Times. Emerging equity and debt markets saw USD 1.1 bn of inflows a day last week, driven by Chinese inflows of around USD 800 mn, exceeding two-decade peaks.

EM have outperformed developed markets so far this year: The MSCI gauge of EM stocks has surged 8.6% in this month compared to US stocks rising 4.7%, according to Bloomberg. Estimates by the news outlet have emerging economies growing 4.1% this year and 4.4% in 2024, compared to 0.5% and 1.2% in the US. Meanwhile, JPMorgan is forecasting EM growth to be 1.4 percentage points higher than in developed markets, the FT says.

But: “The first and second quarters [of 2023] will see an uplift in China, there’s no doubt about that … but much of that is now priced in by markets . . . We may have seen the lion’s share of the rally in this cycle,” an EM bond fund manager told the salmon-colored paper.

Up EGX30 16,791 +2.1% (YTD: +15.0%)
None USD (CBE) Buy 29.86 Sell 29.94
None USD at CIB Buy 29.84 Sell 29.94
None Interest rates CBE 16.25% deposit 17.25% lending
Up Tadawul 10,822 +0.1% (YTD: +3.3%)
Down ADX 9,738 -2.6% (YTD: -4.6%)
Down DFM 3,329 -0.8% (YTD: -0.2%)
Up S&P 500 4,071 +0.3% (YTD: +6.0%)
Up FTSE 100 7,765 +0.1% (YTD: +4.2%)
Up Euro Stoxx 50 4,178 +0.1% (YTD: +10.1%)
Down Brent crude USD 86.66 -0.9%
Up Natural gas (Nymex) USD 2.85
Down Gold USD 1,945.60 -0.1%
Down BTC USD 23,009 -0.3% (YTD: +39.2%)


The EGX30 rose 2.1% at Wednesday’s close on turnover of EGP 2.55 bn (47.8% above the 90-day average). Egyptian investors were net sellers. The index is up 15.0% YTD.

In the green: Credit Agricole Egypt (+9.1%), Oriental Weavers (+6.5%) and Juhayna (+5.8%).

In the red: Eastern Company (-3.3%), e-Finance (-0.5%) and CIRA Education (-0.4%).

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