Investment summary
Economic momentum remains strong in emerging markets. We
forecast that 2010 will be the fifth year of steady economic growth.
The structural story continues to improve with reflation on track and
accelerating public and private sector fixed investment.
Our base case of low US interest rates and a soft landing is
favorable for emerging market financial assets. Policy flexibility in
emerging economies should allow them to compensate for a
decline in OECD demand. Ironically, the OECD central bank
response to the US and European credit crunch may add to EM
equity returns as this additional liquidity flows towards the higher
growth asset class; this would be the mirror image of what occurred
in 1998 when central banks’ response to LTCM and the EM current
account crisis added to the US equity and tech rally.
Investment Themes for 2010
1. Roaring Reflation
2. New Kids on the Block: QDIIs, sovereign wealth funds and
more join the list of traditional investors.
3. Triple merit: Japan in the '80s; Asia (particularly China)
today
4. Marathon Man: pay up for growth
5. Synchronized capex boom
Year ahead process
The goal of this document is to present our key strategy themes for
2008 using our analysts’ most and least favored stocks.
Both JPMorgan EM equity research analysts and our
macroeconomic team have been involved in the production of this
document. The process started with the Strategy Team briefing
analysts on our key themes and macro-economic forecasts for
2010. Analysts then reviewed their earnings models and presented
their top picks and stocks to avoid to both their sector and country
strategists. The sector and country teams then produced their list of
top long and short ideas which were then compiled by the regional
strategy teams. These ideas form the core of this document.