Stock Falls In Emerging Countries Could Mirror 2004 Rally (CS, GS, MS)

Developing nation stocks fell at the most rapid pace in the last 11 months. Investment strategists at Credit Suisse (NYSE: CS), Morgan Stanley (NYSE: MS) and Goldman Sachs (NYSE: GS) seem to be enthused by this, expecting a repeat of the rally of 2004.

Jonathan Garner of Morgan Stanley says that MSCI Emerging Markets Index will increase 34% by end 2010 on the back of higher corporate profits. The view of Sakthi Siva of Credit Suisse is that the stock declines will be limited to just 5.3%.

It may be recalled that in 2004, the MSCI Index had fallen 11% over a couple of months, but finally ended the year at 26% up. Currently, investors are pulling out money from emerging markets ranging from China to India and Brazil.

“The emerging world is going to come out of this in stronger shape,” said Julian Mayo, investment director in London at Charlemagne Capital, which oversees about $3 billion. “This is one of the speed bumps along the way. 2004 ended up being a good year for emerging-market investments.”