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Morgan Stanley Cuts Net Exposure to Five European Nations

Morgan Stanley Cuts Net Exposure to Five European Nations by 21%
Pedestrians walk by the Morgan Stanley headquarters in New York. Photographer: Daniel Acker/Bloomberg

Morgan Stanley, owner of the world’s largest brokerage, said its net exposure to five of Europe’s most-indebted nations was $2.41 billion, down from $3.06 billion in January.

Morgan Stanley’s net exposure to the five countries -- Greece, Ireland, Italy, Portugal and Spain -- was $4.01 billion before hedges, according to figures posted yesterday on the New York-based bank’s website. Net exposure to France rose to $4.14 billion from $1.71 billion as of Dec. 31.

Concern that Europe’s debt crisis would spark bank losses contributed to a 41 percent tumble for Morgan Stanley’s shares in the third quarter of last year. The firm said in October that its net exposure to the five was $3 billion, helping halt the decline of the shares.

Spain accounted for the majority of the net exposure to the so-called GIIPS nations, with $1.32 billion. That included $833 million in unfunded commitments, and a negative $493 million in net inventory. The firm had a net short position of $137 million on Portugal. A short position is a wager the price of a security will fall.

Morgan Stanley had $6.44 billion of net exposure to the five countries, including $4.9 billion to Italy, as of Dec. 31. After it restructured a derivative with the Italian government, which settled on Jan. 3, those amounts dropped to $3.06 billion and $1.52 billion, respectively.

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