Morgan Stanley: Today’s Research

The Morning Call

We see early stages of a turnaround in hedge fund flows with redemption pressures easing andinflows growing. Our research suggests SWFs, foundations and pension funds have overtakenendowments and HNW HFoF as the largest source of funds. We think the market is underestimatingthe potential upsurge in demand for absolute return funds from private clients andsmaller institutions. In the UK, in Q309 there were $2.1bn inflows into absolute return funds, 3xthat of Q1, and we see this growing. Our base case assumes hedge fund AUM returns to 2Q07levels by 4Q10, although we see risks from performance, regulation and reputational issues.Our work supports our Overweight on Man Group, with strong Asian HNW sales, where weforecast 11% NNM growth at Man FY11. We also see upside at SDR and HGG.

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Informe diario de mercados de Morgan Stanley del 19.11.09

Today’s Changes

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Informe diario de Morgan Stanley 02.11.2009

We initiate on HeidelbergCement (HC) at Overweight given a very attractive valuation and risk-reward. HC trades at a discount of 20% to peers on EV/EBIT and 25% on P/E, even in 2009e, yet is best positioned for earnings growth (19.8% CAGR in EBIT 2009e-2012e and 27.2% in EPS). Of the top 10 countries by turnover, seven (55% of sales) should increase their earnings contribution from 2010, with the other three likely bouncing in 2011. HC offers 49% upside potential to our €61.3 price target, 91% upside potential under our V-shaped recovery analysis (bull case), yet has just 26% downside potential under our double dip scenario (bear case). Last, a recent capital increase and focus on cash flow means HC should be able to meet all its debt maturities to 2012, which should allow for a progressive reduction of its financial risk discount.

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Informe de Morgan Stanley RV Europea

Dominant stock picking factors are changing from pure value to a combination of value, quality & growth.

Since the summer of 2008, we have been recommending investors to use valuation as their key stock picking factors, as the valuation spread between cheap and expensive stocks has been 3-4 standard deviations wider than usual in Europe and the US (see ‘Valuation Factors Are Working Again’, 20 October 2008’). Nevertheless, two recent developments suggest to us that investors should start to move away from a pure

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Análisis monetario global de la semana, Morgan Stanley

Excess reserves on central bank balance sheets are at elevated levels. In the US, they are set to cross US$1 trillion, and are likely to rise to US$1.2 trillion by early 2010. Why have excess reserves stayed so high? Commercial banks are likely hoarding cash as a precaution against liquidity and regulatory risk, but they also face very little demand for bank credit

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Morgan Stanley - The Peloton, the "Elastic Band Effect" and Monetary Policy

Major central banks have recently talked down some of the hikes in policy rates priced in by markets. On our forecasts, the ECB and the Fed will likely hike rates only in 2Q10 and 3Q10, respectively. Other central banks have a choice: join the monetary peloton and hike along with the major central banks or join the breakaway group led by the Bank of Israel. Both strategies carry risks. Hiking early gives central banks more control of their hiking cycle, but it also makes policy less effective and puts pressure on the currency to appreciate.

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