M Global IdeaGlobal EM StrategistKenya Leads the WayMorgan Stanley & Co. International plc+James K LordStrategist James.Lord@morganstanley.com +44 20 7677-3254 Neville Z MandimikaStrategist Neville.Mandimika@morganstanley.com +44 20 7425-2509 Pascal N BodeStrategist Pascal.Bode@morganstanley.com +44 20 7425-3282 Morgan Stanley & Co. LLCSimon WaeverStrategist Simon.Waever@morganstanley.com +1 212 296-8101 Ioana ZamfirStrategist Ioana.Zamfir@morganstanley.com +1 212 761-4012 Emma C CerdaStrategist Emma.Cerda@morganstanley.com +1 212 761-2344 Eli P CarterStrategist Eli.Carter@morganstanley.com +1 212 761-4703 Morgan Stanley Asia Limited+Min DaiStrategist Min.Dai@morganstanley.com +852 2239-7983 Gek Teng KhooStrategist Gek.Teng.Khoo@morganstanley.com +852 3963-0303 Following the recent USD move, we take off our remaining long USD trades (CLP, THB and PHP). Instead, we suggest RV trades within EM with a focus on carry, including BRL and INR. In rates the focus is front end and RV trades while in credit we reduce beta exposure further due to tighter valuations. FX & EM Strategy: Kenya's USD bond issuance is an important positive not only for Kenya but also for the asset class as a whole. It supports two of our key views for the year ahead. First, as external conditions improve, market access will open up to lower-rated issuers, even if it means issuing at around 10%. Second, the number of defaults in the EM sovereign credit index will fall. That said, the focus for most countries is still to consolidate fiscals further, in particular as interest rate costs stay high versus history. Sovereign Credit Strategy: We focus on stance changes within CEEMEA. In Sub-Saharan Africa, Senegal has been topical and we moved the credit to a like stance following positive developments around election scheduling, which should bring the focus back to the longer-term structural story around oil and gas production. We suggest buying SENEGL 33 versus JORDAN 30, with the latter affected by a potential deterioration in sentiment and flows. Within the region we also close our Angola like stance given rising positioning and falling spread attractiveness. In northern Africa, we remove our Egypt and Morocco like stances, closing both our Egypt 10s30s steepener trade and our recommendation to buy MOROC 50 versus REPHUN 51. For Egypt, risks relate to a potential delay in the FX adjustment, while for Morocco spreads are now only fair for ratings. Lastly, in the Middle East we move Qatar to a dislike stance. This is primarily an expression of unattractive spread cushions in select IG curves including Qatar following the recent UST sell-off, with KSA instead offering better valuations. This leaves our main like stances as Romania and Saudi Arabia in CEEMEA IG and Senegal, Ghana and Kenya in CEEMEA HY.LatAm Macro Strategy: We explore BRL's recent sluggish performance, and we outline thr...
