India becomes Morgan Stanley's biggest overweight

India has become Morgan Stanley’s biggest overweight in the Asia-Pacific, excluding Japan/emerging market portfolio. 

The brokerage has increased India weightage by 50 basis points to 250 bps in its 27-nation portfolio for the region after the domestic markets fell as much as 10 per cent in dollar terms since November 8 owing to demonetisation.

“The current low return environment that India seemed to be trapped in may get a breather in 2017 thanks to better equity valuations, the bottoming of the growth cycle (disrupted temporarily by the recent de-monetisation) and higher correlations with world equities on which we are more constructive,” Morgan Stanley said in a note.

Besides India, China, Taiwan, Peru, Chile and Czech Republic are some of the other overweights for Morgan Stanley. 

Australia, South Africa, Singapore, Malaysia, Thailand, and Qatar are the underweight markets. Morgan Stanley has reduced South Korea to equalweight from overweight and upgraded China from equalweight to overweight.

Overweight or underweight means high or low weight than the benchmark index. Equalweight means similar weight as in the benchmark index.

“Overall, we think that emerging markets face significant headwinds in 2017 and that the chances that a new secular bull market for the asset class began in 2016 are now lower than before,” the brokerage said in a note.