Emerging Markets Profit Outlook: Morgan Stanley Charts the Mid-Term Growth Trajectory

In a recent global macro forum, Daniel Blake, Morgan Stanley's equity strategist for Asia and Emerging Markets, presented the firm's mid-term perspective. The analysis centers on a compelling forecast for the Earnings Per Share (EPS) of the benchmark MSCI Emerging Markets Index.

The Growth Curve: Transition from High Gear to Steady Pace

The firm's projections indicate a potential surge in EPS growth for the MSCI EM Index by 2026. Looking ahead to 2027, this momentum is anticipated to decelerate to a more moderate rate. This projected path sits slightly below the current broader market consensus, suggesting investors should be mindful of cyclical shifts in growth drivers.

Primary Engines: Sectoral Opportunities in Rotation

The report identifies the key sectors powering recent upward revisions to EM earnings estimates:

  • Information Technology: Ongoing innovation and digital transformation demands provide a robust foundation for growth.
  • Energy Sector: The global energy transition and regional supply-demand dynamics are creating fresh opportunities for related firms.
The strength of these two pillars is actively reshaping the profitability landscape of emerging markets.

Regional Focus: Highlighting Structural Potential

Morgan Stanley's strategy adopts a selective view, pinpointing regions with distinct potential:

  • Within Asia, North Asian markets are accorded significant focus.
  • On a country level, Brazil, Greece, Hungary, and Saudi Arabia are highlighted for their promising outlook.
  • Notably, the report expresses clear optimism toward China's A-share market, identifying unique value opportunities within it.

Strategic Priority: Capital Expenditure Takes the Lead

Moving beyond a reliance solely on consumption-led growth, the outlook emphasizes that the expansion of capital expenditure holds greater strategic importance than consumption growth in the current macro environment. Increased corporate investment in equipment, technology, and infrastructure is viewed as a critical factor for driving sustainable future profitability. This assessment offers crucial directional guidance for investment allocation.