Morgan Stanley suggests

Emerging market stock indices could soon reach the low point in the current bearish cycle, analysts at Morgan Stanley (NYSE:MS) believe.

As a consequence, economists of the bank, including strategist Jonathan Garner, changed the recommendation for securities of developing economies and Asian countries excluding Japan to "above market" from "at market level", writes Bloomberg agency.

The revaluation by Jonathan Garner, who correctly predicted a deepening rout in emerging markets and China earlier this year, comes just as emerging market stocks have experienced a record drop from their recent peak amid a rising dollar and strict restrictions imposed by China over Covid.

The MSCI EM index has fallen 26% since the beginning of the year amid a stronger dollar and tough measures to contain the coronavirus pandemic in China. Morgan Stanley expects the indicator to rise 12% by June next year.

"A lot of firewood has already been chipped and it's time to plant saplings for the next cycle," the bank's analysts wrote.

The experts also improved recommendations for South Korean and Taiwanese stocks, as well as for semiconductor and technology equipment stocks.

In a separate note, Morgan Stanley analysts upgraded recommendations for Korean microchip supplier SK Hynix Inc. (KS: 000660), Apple (NASDAQ: AAPL) parts supplier LG Display Co. (SPB: LPL) and Taiwan-based AUO Corp. According to them, shares of Taiwan Semiconductor Manufacturing Co. are among the most promising targets for investment.

At the same time, the experts downgraded recommendations for outperforming markets this year, moving shares of companies in Indonesia and Singapore to the "market-level" category.

Morgan Stanley said it expects the benchmark MSCI EM index, which has fallen 26% this year, to rise about 12% through June.