Buy U.S. Stocks Gaining From China Growth: Morgan Stanley

U.S. stocks like Monsanto Co. (MON) and Viacom Inc. that benefit from growth in Chinese markets are attractive investments if the world’s second-largest economy expands more than forecast this year, Morgan Stanley said.

AON Corp. (AON), Leggett & Platt Inc. (LEG) and Time Warner Cable Inc. (TWC) shares could also rise if the Chinese economy beats estimates, according to Adam Parker, the New York-based U.S. equity strategist at Morgan Stanley. He also recommended a group of more than 30 large-capitalization U.S. stocks and American depositary receipts of about 32 Chinese companies in a note dated yesterday.

Wen Jiabao, China’s premier, cut the country’s economic growth target for 2012 to 7.5 percent from 8 percent last week. Export-growth momentum appears to be rising and property transactions in major cities may be increasing, Helen Qiao, Morgan Stanley Asia Ltd.’s Hong Kong-based chief economist, said in the note. China’s local governments are likely to ease implementation of measures restricting growth in the housing market in the first half of this year, she said.

“We looked for U.S. stocks that have exposure to the Chinese market above and beyond the impact” on the American equity market, Parker wrote. “We continue to believe that the risks are skewed to the negative for the U.S. stock market.”

The Standard & Poor’s 500 Index is valued at 14.3 times profit, an 11 percent premium over the price-to-earnings ratio of the Shanghai Stock Exchange Composite Index, data compiled by Bloomberg show.

U.S. companies from Apple Inc. (AAPL) and McDonald’s Corp. (MCD) to Las Vegas Sands Corp. (LVS) and Medtronic Inc. (MDT) are also among those that Parker recommends as potential beneficiaries if China’s growth beats forecasts, Parker said. Baidu Inc., Cnooc Ltd. (883) and PetroChina Co. are included in the list of China ADRs to buy, the report said.

To contact the reporter on this story: Andrew Theen in New York at atheen@bloomberg.net

To contact the editor responsible for this story: Nick Baker at nbaker7@bloomberg.net

Press spacebar to pause and continue. Press esc to stop.

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.