The end of the bounce?

THREE weeks ago, this column featured Morgan Stanley's recommendation to "believe in the bounce". The US investment bank had said it expected a sustainable rebound into year-end based on developed-market growth holding up, Chinese growth stabilising, attractive valuations, and better positioning/technicals.

For emerging markets (EMs), though, it had said the bounce would be sharp but not the beginning of a new bull market.

On Friday, Morgan Stanley said it thinks the bounce has now run its course since the targets it had set for EM indices have almost been reached. "Our base case would be a range-bound market from here until the conclusion of the Federal Reserve meeting due on December 16," said Morgan Stanley in its Oct 30 Asia/Gems Equity Strategy. "Our view at the time of our early October note, and now, remains that the bounce will fade coincident with the earnings season, which has begun poorly," it said.