Morgan Stanley is optimistic about Australia, India and Singapore
People are seen lined up at a Covid-19 testing site at Mona Vale Hospital on December 18, 2020 in Sydney, Australia.
Jenny Evans | Getty Images News | Getty Images
Morgan Stanley is optimistic about Australia, India and Singapore.
The three countries in the Asia-Pacific region that have handled the coronavirus pandemic well stand out, said Jonathan Garner, managing director and chief Asia and Emerging Markets equity strategist at the investment bank.
With the world reopening as coronavirus vaccines become more readily available, these countries are showing significant growth momentum, Garner told CNBC’s “Squawk Box Asia” on Tuesday.
Australia: Banking and Materials
For Australia, Garner is optimistic about the country’s materials and banking sectors.
“The materials sector has been a preference of ours for some time. But we are doing well now through the worst valuation adjustment for the banks,” he said.
Garner also noted that Australia’s growth is recovering “very significantly”, saying the country was “one of the regions that has likely handled the Covid situation better than anywhere else”.
The Australian economy expanded faster than expected in the fourth quarter of 2020, and there are indications that 2021 has also started on solid foundations, supported by massive monetary and fiscal stimuli.
The economy picked up 3.1% in the three months to December, data from the Australian Bureau of Statistics showed.
India: V-shaped jump
Similarly, Garner is optimistic about India’s management of the pandemic, saying it has weathered the crisis better than some countries in Latin America and the Middle East.
According to the Johns Hopkins University, India has the second highest number of Covid-19 cases after the US. More than 157,900 people have died from complications related to the disease. But the country has seen a steady decline in daily newborns since October as the government continues to make strides in introducing vaccinations.
In terms of GDP growth and the type of countries we expect to have the strongest V-shaped recovery, India is at the forefront.
India will benefit from the policies and reforms announced in the February budget, which Garner said will aim to get growth going again. He stated that the budget included “constructive” measures such as continued fiscal support to the economy. There were also announcements related to the government’s commitment to privatizing state-owned assets, he said.
“In terms of GDP growth and the type of countries we expect to have the strongest V-shaped recovery, India is at the forefront,” Garner added.
S&P Global Ratings predicted in February that India is on track to recover from the contraction caused by pandemics and that South Asia’s largest economy could grow 10% in fiscal 2022. However, some analysts have warned that a potential consumer credit crunch could hurt progress.
Singapore: supported by higher oil prices
While Singapore handled the pandemic well by global standards, it will benefit from other countries reopening their economies and implementing measures aimed at higher spending and production expansion.
According to Garner, the city-state should also benefit from higher oil prices.
Singapore is a net importer of oil. The country is a major player in the global offshore and shipping industry, where local companies dominate the oil rig construction market. It is also an important source of refined oil. Developments in these areas have a direct impact on the Singapore economy and the stock market.
Brent crude oil futures surged above $ 70 on Monday for the first time in more than a year after Saudi Arabia announced that its oil facilities were attacked by missiles and drones on Sunday. The global benchmark failed to maintain momentum, however, and prices fell below $ 70 after the kingdom declared that its oil facilities had not suffered material structural damage.
Singapore is “positively poised for the positive surprise that we are getting oil, which is an interesting feature of the current environment. The energy sector is starting to function quite well around the world,” he said.