Market Strategy

Market Strategy: Credit Suisse has cut its weightings in Global Emerging Markets (GEM) from 25% to 10% overweight on a 2-mth tactical view. It believes that the underperformance of GEM has been mainly driven by 1) worries about emerging market overheating; 2) acceleration in developed market growth relative to GEM; 3) valuation being at the top-end of the historical range; & 4) Positioning & sentiment sending a modest negative signal. House remains 25% overweight on a 3-12 mth basis.

Separately, Morgan Stanley opines that while it continues to be cautious about the near term outlook, value has appeared & expects emerging market stocks to rebound 18% this year from current levels. The brokerage views the underperformance as likely more than half way done for this cycle in percentage terms & likely to reverse as the tightening process ends in emerging markets & the market begins to perceive a heightened likelihood of tightening in developed nations.