As China deals with a decelerating economy, U.S. investors are jittery over American companies with high exposure in the emerging market.
The recent consensus has been to steer clear of China. At a Morgan Stanley investor conference, zero per cent of surveyed responders thought owning U.S. stocks with high EM exposure would be a good idea for the second half the year, according to house strategist Adam Parker.
Ultimately, whether China’s economy grows 4, 5, 6, or 7%, aren’t all of those levels likely better than the US, Europe, and Japan? Hence, shouldn’t US companies with exposure there ultimately have faster growth, depending on the exposure? Given how low sentiment is, we think the pendulum has probably swung too far, and at some point in the next year, investors won’t be calling us asking for the list of US companies with China exposure to short the stocks, but rather to long them.
Morgan Stanley’s average growth estimates in China still beat out the rest of the world — and by a lot.
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