Morgan Stanley Trims EM Exposure

Morgan Stanley has reduced their exposure slightly across EM ccys, rates and credit in the wake of a recent rally, strategists including James Lord wrote in a note.

• "We see the rally in EM currencies being front-loaded into year-end and 1Q21, but then petering out."
• "We are also neutral on EM credit, where we think that spreads are close to bottoming out"
• Below are the main changes to the bank's trade recommendations:
  • Closes long SAGB 48 and short USD/ZAR trades, but keeps positive bias in credit
  • Tightens stop loss levels on long BRL, MXN, COP vs USD, EUR trade recommendations
  • Removes bullish view on Ukraine, but sticks with long recommendation on GDP warrant
  • Stays bullish Pemex but move into the long-end 2060 bonds as 2031 notes hit target
  • Closes buy Egypt 25G vs Bahrain 25 trade
  • Remains short USD/KRW with new target of 1050 on strong outlook for exports, stocks
  • Buy Brazil 2047 vs Colombia 2051, Mexico EUR 2031 vs Chile EUR 2031 and close Chile 2050 vs Peru 2050, sees value in Mexico 2034, Peru 2037