In order to provide their clients with the best possible return on their investment, financial services companies like Morgan Stanley (NYSE:MS) are always on the global look out for profitable opportunities so that they can strike while the iron is hot. Well, the iron has got a whole lot hotter in China according to Morgan Stanley’s Jonathan Garner. John Dawson reported on the analyst’s thoughts on Bloomberg.
“Morgan Stanley (NYSE:MS)’s Jonathan Garner, Head of emerging markets in Asia, Strategy Morgan Stanley has said this, “New account openings are a sign that there is fundamental investor participation. Moves on high volumes should always be taken seriously […],” said Dawson.
The new account openings are high to an extent that there four week average hasn’t seen the levels that are prevailing now, since April 2011, according to Dawson. Moreover, the bull is already out of the cage as Shanghai Composite Index (SHCOMP) gained as much as 14% in just November.
Dawson also revealed other underlying reasons as to why Morgan Stanley (NYSE:MS)’s emerging markets head expects that there is money to be made in China.
“[…] He believes in China’s soft landing. He is forecasting what he calls the Ultra-Bull rally. The stocks may double in 18 months, so stick with that. Also low returns for alternative investments, for example property, transition in China to a growth model i.e. domestic consumption. He favors new economy areas like healthcare, technology, financials […],” said Dawson.
The change in growth model that is being mentioned here is China shifting its focus from export led growth to more organic growth in which the local population fills the gap from the shortfall of exports by consuming more.
Moreover, other numbers which point out to a continuation of this rally include the still low valuations that the market is receiving. According to Dawson the Shanghai Composite Index is still trading at 1.7 times the assets, which is a 17% discount to the World Index.
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