Morgan Stanley (NYSE: MS) today announced the release of its latest AlphaWise Evidence Series report, on Asia inflation – a new publication that surveyed 5,270 consumers in six Asian countries: China, India, Indonesia, Japan, Korea and Taiwan. Entitled “Asian inflation: worse still to come: consumers adjust”, the proprietary survey was conducted by Morgan Stanley AlphaWise which carries out evidence-research on behalf of Morgan Stanley Research analysts worldwide. The survey continues the thought leadership which Morgan Stanley has shown in highlighting inflation as a risk to Asian equity market performance.
Key conclusions of the report:
• We continue to see significant upside risks to the upwardly revised inflation outlook
• Downward pressure on consensus earnings and ROE estimates expected
• The upstream Energy and Mining sectors will likely continue to outperform Consumer Discretionary and Financials sectors
• Performance relative trends will likely only reverse once inflation peaks
“A combination of factors could cause inflation in Asia (ex-Japan and India) to peak at a higher level of 5.7% in June instead of our base case scenario of 4.9%,” said Chetan Ahya, Regional Economist for Asia ex-Japan at Morgan Stanley. “These factors include relatively strong domestic demand, recent stronger-than-expected external demand, a lagged response from policy makers and supply shocks in the form of higher food and global commodity prices that bring upside risks to inflation forecasts.”
Additional highlights from the findings:
• 71% of respondents expressed worries about inflation over the next 12 months
• 58% expect the inflation rate to be higher than 6%
• 59% of respondents believe their wage growth will be lower than their expected inflation rate, implying a loss of purchasing power. Interestingly, 45% of them have not seen increases to their household wages over the past 12 months
• 46% of households indicated they would reduce/defer consumption spending in response to higher inflation
Jonathan Garner, Chief Asian and Emerging Market Equity Strategist, said: “We remain below consensus on our target price for Asia Pacific ex-Japan equities with a cautious view due to slowing growth, rising inflation and heightened policy risk.”
In May 2010, Morgan Stanley was ranked fourth by Institutional Investor magazine in the 2010 All-Asia Research poll. The Firm has also earned number one positions in regional economics, consumer, healthcare and pharmaceuticals, Australia and India.
Morgan Stanley AlphaWise conducts evidence-based investment research to help validate key investment debates on behalf of Morgan Stanley Research analysts worldwide. The team employs innovative techniques to derive differentiated insights and forecasts – market research, Web mining, and real-time data sets.
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