Morgan Stanley Forecasts Broader EM Rally After MSCI Companies Exceed EPS Estimates, Gain 30%
MS•MSCI EM companies reported 12-month EPS of 95.1, beating last year’s estimate of 94.6 for first time since April 2022. Morgan Stanley predicts EM gains will extend beyond AI, citing a 30% year-to-date rally and a 30% allocation lift from a 5% US portfolio shift.
1. First EPS Beat Since April 2022
MSCI EM companies delivered a weighted average EPS of 95.1 index points for the 12 months through May, surpassing last year’s blended estimate of 94.6 for the first time since April 2022, marking renewed profit momentum across emerging markets.
2. Morgan Stanley's Bullish EM Outlook
Morgan Stanley has joined other investors in forecasting that EM gains will spread beyond AI-related stocks, citing a 30% year-to-date increase in EM equities as evidence of a rally built on fundamentals rather than speculative froth.
3. Impact of US Portfolio Reallocation
Analysts project that shifting just 5% of a US equity portfolio into emerging markets could drive a roughly 30% boost in EM allocations, underscoring the potential for substantial inflows if institutional investors reallocate based on the improving profit outlook.
4. Sectoral EPS Surprise Highlights
Notable EPS surprises included SK Hynix’s 43% beat, Samsung Electronics’ 16% beat, and TSMC’s 5.7% beat, while Indian Oil Corp. topped estimates by 33% and Brazilian electricity producer Eneva posted a 44% surprise, highlighting strength across diverse EM sectors.
