“While there remains considerable uncertainty about the way forward from a market perspective, we believe developments in the Middle East remain at an early stage and warrant ongoing caution,” Morgan Stanley strategists, including Jonathan Garner, said in a note to clients.
The brokerage said India’s macroeconomic stability situation has improved in that it is less exposed to historically high oil prices, but concerns remain about the fallout from AI-related disruptions. “With uncertainty still hovering around AI disruption and absolute valuations still expensive, we expect it will take some time – and possibly a peak in the tech cycle for Korea and Taiwan – before global investors flock to India,” Morgan Stanley said. Morgan Stanley said.
India, Thailand, Korea and Taiwan will face growth risks due to their large oil and gas balances, while the Philippines, Indonesia and India may face some pressures due to widening current account deficits, the brokerage said.
“Asia/EM equities are at a critical juncture here, with several weeks of supply disruption and uncertainty fundamentals, and more severe disruptions than in 2022 with the risks of an escalation scenario (which was more concentrated in European energy markets),” Morgan Stanley said. MSCI Asia-Pacific fell 16% between March and July 2022 as a result of the Russia-Ukraine conflict and energy market impacts, before stabilizing briefly, and then falling further during a period of global equity adjustment and technical downside, the brokerage said.
