UBS Joins Morgan Stanley in Touting Hedges Across Emerging World

UBS AG is telling investors to seek protection against potential losses in emerging-market credit as the fallout from the escalating war in Iran threatens developing economies.

The Swiss bank recommends positioning in an emerging-market index of credit-default swaps, known as the Markit CDX-EM index, alongside selective bearish bets in developing-nation currencies. While the conflict has roiled EM stocks and local yields as oil surged, credit spreads have shown a more muted reaction, leaving them vulnerable to further swings.