Investment Bank UBS Sees Bright Spots In Global Economy

Source : Channel NewsAsia, 07 January 2008

Investment bank UBS is optimistic the global economy is not headed for a global recession this year.

But it says growth is likely to slow from last year and it has shaved its forecasts for US, Europe and Asia.

Despite the slowdown, the bank believes there are bright spots in 2008 where investors can park their funds. It recommends that investors avoid Asian exporters.

It says this is because the main issue across the world right now revolves around slowing US consumer demand. The effect of this will cut across major industries from technology to telecoms firms.

Instead, UBS suggests investors look at companies whose demand is largely derived from Asian economies.

Benjamin Yeo, Executive Director, Asia Corporate Research Head, UBS Wealth Management Research, says: "We'll avoid Asian exporters. It cuts across major industries. Could be tech, telecoms, even consumer discretionary products.

"In place, we will focus more on Asian domestic names. In particular, we look at countries where a large percent of GDP comes from domestic demand. This includes countries like China, India, Indonesia."

In the longer term, UBS says Asia is well-poised for rapid urbanisation and this makes infrastructure stocks alluring.

Mr Yeo says: "While we are seeing a global slowdown - that's a transitional period. We believe, in Asia, we are seeing structural changes...

"I have two themes which we at UBS are interested in getting our clients into: increased affluence and rapid urbanisation in Asia. We think the two infrastructure themes can help in selecting stocks."

UBS says the smart money will be on large companies rather than smaller cap firms.

Mr Yeo says: "In developed markets, we think big caps have underperformed and will regain performance vis a vis small caps. In Asia, on the other hand, the big caps have started to outperform since 12 to 18 months back. We think this outperformance will continue."

As for the Singapore economy, UBS says it is healthy, with the tourism, services and property development sector keeping bad vibes at bay. - CNA/ch