The U.S. Federal Reserve struck a hawkish tone at its latest meeting and Treasurys have risen to multi-year highs . According to Morgan Stanley, those conditions could put certain stocks in Asian and emerging markets at a disadvantage. The U.S. 10-year real yield recently rose above 2.1% — the highest level since 2006-2007 — and that “could put pressure on valuations of stocks with long duration exposures,” the bank’s strategists wrote in a Sept. 22 note. “We believe large cap growth stocks, particularly the low quality and unprofitable ones, could come under pressure,” they said. More specifically, those set to be “disadvantaged” are high-growth names “with low balance sheet quality” and low free cash flow yield. Stocks with ‘longest duration exposure’ The bank ran a screen of Asian and emerging market MSCI index constituents that meet the following criteria: 1) lower free cash flow yield than their peers; 2) higher financial leverage than their peers; 3) categorized by the bank as growth and low-quality stocks; and 4) a market capitalization of over $5 billion. Here are some of the stocks with the “longest duration exposure.” Sony Group : The bank is overweight on the Japanese electronics and entertainment group, giving it a target price of 16,000 Japanese Yen ($107), representing more than 30% upside from its Sept. 26 close. Chinese food delivery giant Meituan also received an overweight rating at a price target of 180 Hong Kong dollars ($23), giving it an upside of 54.8% from its Sept. 26 close. Morgan Stanley is overweight-rated on New Zealand-headquartered software and services player Xero at 125 Australian dollars ($79.78), giving it an upside of nearly 10% from its Sept. 26 close Other names the bank is overweight on are Chinese biopharmaceutical company Innovent Biologics and automaker Nio at price targets of HK$59 and $18.70 — representing 54.5% and 123.4% upside, respectively. Morgan Stanley had an underweight rating for Alibaba Health Information Technology , a Chinese integrated pharmaceutical services provider. — CNBC’s Michael Bloom contributed to this report.
