M UpdateAsia Quantitative Strategy | Asia PacificPositions of Active Long-Only Asia/EM ManagersWe publish our first Asia/EM positioning guide to summarize allocation changes on stock, country and sector level over time from a regional perspective. On top of that, we also share the distribution of active weights and compare allocation difference between US and EU managers. Morgan Stanley Asia Limited+Jason Ng, CFAQuantitative Strategist Jason.Dl.Ng@morganstanley.com +852 2848-8845 Gilbert Wong, CFAQuantitative Strategist Gilbert.Wong@morganstanley.com +852 2848-7102 Morgan Stanley appreciates your support in the 2024 Institutional Investor All-Asia Research Team Survey. Request your ballot here. Exhibit 1 : Distribution of "Active Weight on China" Among the 80 Largest GEM Funds02468101214161820less than -10%-10% to -8%-8% to -6%-6% to -4%-4% to -2%-2% to 0%0% to 2%2% to 4%4% to 6%6% to 8%8% to 10%more than 10%No. of US Domiciled GEM FundsNo. of EU Domiciled GEM Funds Source: FactSet, Morningstar, Morgan Stanley Research. Data as of Dec 31, 2023. This chart covers the 80 largest active mutual funds with emerging markets as investment universe. All bottom-up driven. Dividend, ESG and quant funds are excluded. Exhibit 2 : US managers prefer India; int'l managers are more neutral on Korea & Taiwan-4.00%-2.00%0.00%2.00%4.00%6.00%8.00%IndiaMexicoBrazilSaudiArabiaPhilippinesUnitedArabEmiratesIndonesiaSouthAfricaKoreaTaiwanInternationalUS FundsDiff (US - International)US u/w vs Intl.US o/w vs Intl. Source: Morningstar, FactSet, Morgan Stanley Research. Note: Data as of Dec 31, 2023. Focus of The Month - China UW: According to our bottom-up fund position analysis by tracking the largest 80 EM active long-only mutual funds (with average fund AUM at US$3.9bn), the dominated rebalancing activities among these managers in 2H2023 were to rotate out of China, Taiwan and Korea, and add toward Brazil and Mexico, ( Exhibit 5 ). On sector level, they added Financials but trimmed Info Tech ( Exhibit 9 ). Underweight China is almost a consensus position among EM active long-only funds, with the average underweight estimated to be 3.2%. In terms of distribution, 70 out of the 80 EM funds we track are either equal-weight or underweight China ( Exhibit 1 ). For the remaining 10 EM funds, if they also turn equal-weight on China, it would imply an outflow of US$1.1bn. We also note that there is a meaningful market preference discrepancy between US and EU managers – US managers prefer India over Korea and Taiwan, while EU managers are more neutral among the three countries ( Exhibit 2 ). Morgan Stanley does and seeks to do business with companies covered in Morgan Stanley Research. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of Morgan Stanley Research. Investors should consider Morgan Stanley Rese...
