Based on Morgan Stanley’s EPS estimate, the MSCI emerging market index is trading on a forward P/E of 14.5x, while consensus sees the market as trading on 11.9x, and hence, analysts at Morgan Stanley believe it is very expensive. Jonathan F Garner and colleagues said in their March 31 research note titled “The end of the emerging market equity bear or just a counter-trend move?” that they believe the recent rally will end soon.
Emerging market: still the worst area in global equities
Garner and team point out that after the recent rally, there is 10% downside to their Base Case Target Price for the MSCI emerging market index of 735. The following table captures the derivation of their Base Case and Bull and Bear Cases. The...
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