India vs US vs China: Why Morgan Stanley has diverging views on economies, stocks

“We have been more constructive on Asia’s growth outlook than consensus. Moreover, one of the key calls we have made for 2023 is that we expect Asia’s growth to outperform other regions’, especially against DMs (developed markets),” said a Morgan Stanley (MS) note on Asia Economics.

US

“Given our view that the earnings recession is far from over, we think March is a high risk month for the next leg lower in stocks. With uncertainty on the fundamentals rarely this high, the technicals may determine the market’s next big move,” said strategists led by MS’ Michael Wilson in a note, as quoted by Bloomberg.

India

For Asia ex China, other strategists’ led by Chetan Ahya believe that the soft patch in India has already been met with renewed acceleration in the growth data points, while for other large economies, they expect that with sustained private final demand growth, this will help drive the next phase of the recovery. Robust domestic demand in Asia ex China, supported in part by structural stories in India and Indonesia.

“Growth indicators had slowed post the festive season in October in a fairly broad-based manner. This had raised investors’ concern that the economy was starting to lose some steam. However, growth indicators have started to show signs of reacceleration in early 2023. Healthy household balance sheets and a pickup in private and public capex will sustain gains in employment – which will allow consumption growth to stay strong in the coming quarters. Government policies are still very much geared towards reviving private investment, which we expect will continue to unfold as strong trailing demand has already lifted capacity utilization.”

China

A clear shift in government policy setup in China to a pro-growth pro-business helping to lift China’s growth while at the same time generating positive spill-overs to the rest of the region, as per the global brokerage. 

“In recent weeks, however, some skepticism has emerged on two fronts – For China: Investors do not see consumption growth being sustained after the initial reopening effects as they see a lack of drivers; and in Asia ex China – There has been some softening of growth momentum starting from 4Q22in select economies,” MS’ note highlighted.