From Morgan Stanley (Nov. 20):
This week we make the regular monthly re-run of our quantitative country model. Our key changes this week are: (1) Downgrading China to Underweight (from Equal-weight); (2) Upgrading Korea to Overweight (from Equal-weight); (3) Downgrading Hungary to Equal-weight (from Overweight) and (4) Upgrading Chile to Equal-weight (from Underweight).
Results fit the more cautious tactical top-down stance adopted in our 2008 outlook piece. We take China to underweight this month as we think the risk-reward profile has begun to worsen. The model is now recommending underweights on both China and India, and since last week we have no Chinese or Indian stocks in our Focus List. Having been very bullish on China for some time now, we have become increasingly concerned over the past four weeks with the way leading Chinese stocks have detached from the rest of the asset class. Risks of further tightening measures have increased, raising the prospect of slower earnings growth, which may be difficult for the equity market to shrug off given the extended valuations. Korea goes to an Overweight this week on the back of improvements in its business cycle, improving earnings growth, and a less technically overbought position. We favour the Banks and Telecoms sectors within Korea....
