Morgan Stanley Global Research Upgrades Malaysia

The influential Morgan Stanley Research has upgraded Malaysia and Egypt last week in the much followed Asia Strategy Report. Below are excerpts from the report:

Key changes in our country quant model this month are:

Upgrading: Malaysia and Egypt from equal-weight to overweight;
Downgrading: Peru and Chile from equal-weight to underweight.

Overweight countries are: China, Brazil, Taiwan, India, Israel, Poland, Malaysia and Egypt;
Underweight countries are:

Strong points for Malaysia in our model include a #1 currency ranking and #4 business cycle ranking. Relative P/Book has fallen to 1.0x due to recent under performance. Malaysia also gains in our model ranking this month, moving from #8 to #6. Strong points for Malaysia in our model include a #1 currency ranking (a combination of fundamental upside and a stock market consisting mainly of domestic demand, Malaysia ringgit earning stocks).

Malaysia ringgit is making steady progress against the US dollar.We also rank Malaysia’s business cycle score in the top quartile of EM countries in the model. Exports seem set to
trend up strongly from here, and Malaysia is one of the EM countries most geared to a recovery in global trade and commodity prices.

Due to recent under performance, the P/BR relative of MSCI Malaysia to the EM benchmark (now 1.0x) has fallen significantly. Malaysia is one of the least technically overbought markets in the asset class, ranking #5 on this metric. Moreover, the median GEM fund is running a significant underweight of 132 bps versus the benchmark, substantially higher than the average for the last five years.