Morgan Stanley Adjusts EM ETF Portfolio

In fresh adjustments to its emerging markets ETF portfolio, Morgan Stanley has trimmed its exposure China, the world's fastest growing major economy, to 20.3%. The bank's model emerging markets ETF portfolio uses the SPDR S&P China ETF (NYSE: GXC) as its China ETF of choice.

Pointing to signs of a slowdown, the bank scaled back its China exposure and also said it pared its exposure to Russia 9.5%. The bank formerly used the Market Vectors Russia ETF (NYSE: RSX), the dominant Russia-specific ETF, in the portfolio, but now prefers the iShares MSCI Russia Capped Index Fund (NYSE: ERUS).

Morgan Stanley estimates ERUS has gained net inflows in the past 13-weeks of $45 million versus net outflows of RSX of $394 million, according to Barron's.

The iShares MSCI Taiwan Index Fund (NYSE: EWT), which has faltered in recent weeks perhaps due to China weakness, was reduced to 9.2% of the Morgan Stanley EM ETF portfolio.

Barron's notes the bank is bullish on Indonesia and the Philippines through the iShares MSCI Indonesia Investable Market Index Fund (NYSE: EIDO) and the iShares MSCI Philippines Investable Market Index Fund (NSYE: EPHE).

The iShares MSCI Brazil Index Fund (NYSE: EWZ), the largest and most liquid Brazil-specific ETF, now has a weight of 18% in the Morgan Stanley EM ETF portfolio.