From Morningstar: 2024-09-18 06:30:00

Michael Bourke, Head of Emerging Markets Equities at M&G Investments, discusses the recent challenges and potential turnaround for emerging markets. China’s economic slowdown and high U.S. rates have impacted earnings and equities. However, with Chinese stimulus and expected U.S. rate cuts, a more positive outlook is emerging with potential earnings growth.

Despite China’s struggles, India’s strong performance indicates it could be a driving force in emerging markets. With a dynamic economy and young population, India is forecasted for continued growth. However, caution is advised as Indian equities are more expensive compared to cheap Chinese equities, signaling potential risks.

Bourke warns of potential corrections for Indian stocks due to elevated earnings multiples. While Indian earnings growth has been strong, caution is advised as any slowdown could lead to market punishment. Long-term outlook for India remains positive, but near term caution is advised due to high valuation expectations.

In India, banks present opportunities as they have been left behind in the equity market rally. The shift from bank deposits to stock market investments has impacted lending growth, creating opportunities in undervalued banks. Policymakers are monitoring this trend to avoid potential economic impact from restricted lending growth.



Read more at Morningstar: EM Manager is Cautious and Optimistic on India