>>> Expect EM ROE to Trough Below 2008/09 Crisis Low - Buy Back Japan First
We reduce our 12 month forward Target Prices for MSCI EM, APxJ and HSI /HSCEI/MSCI China substantially. Our Topix Target Price is unchanged at 1740. We now expect EM ROE to trough at around 10%, below the trough in 2008/09. (Note attached)
>>> European Economics - Waiting for Capex to Kick in Despite EM Concerns (note attached)
>>> European Equities - European shares – Double-digit upside despite another year of 0% EPS growth
We remain positive on EU equities despite material cuts to our EPS forecasts. Post the correction we expect a modest PE rebound & our MTIs give a Full-House Buy Signal. We stay OW EMU exposure & periphery vs UK. We like Banks vs UW defensives. We remain UW EM exposure, but watch for opportunities. (Note attached)
>>> MS GLobal Macro - Growth Gets Stuck in Middle Gear
With growth still sluggish and new risks emerging, the global economy seems to be stuck in middle gear. As policy-makers are approaching key decisions, the macro debate has zoomed in on China, EM more broadly and the Fed. The growth trajectory shifts down, but still points up. Inflation is pulled lower by commodities. While 1Q15 likely marked the trough for growth and inflation, we are cutting our estimates and see the risks skewed to the downside. (note attached)