UBS Expects Asia to Boost its Revenues in 2012

by Trefis Team
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Pu Yonghao, the Chief Investment Strategist for UBS’s (NYSE:UBS) wealth management business, believes that the Asian market will see considerable growth over this year. [1] In his interview with the Economic Times, Pu expressed his views about the Asian bond, equity as well as currency markets, and his optimistic outlook toward the region. With the European region expected to remain in flux for the larger part of 2012, and with the U.S. expected to show moderate growth, the Asia-Pacific region seems to hold a lot of promise for major investment banks including Goldman Sachs (NYSE:GS), Morgan Stanley (NYSE:MS) and Credit Suisse (NYSE:CS) this year.

We maintain a $16 price estimate for UBS and attribute the 30% premium over current market prices to the pessimistic outlook for banking stocks in the wake of economic conditions and the European debt situation.

See our complete analysis of UBS here

UBS’s cornerstone wealth management business, which we believe contributes nearly 60% of the bank’s value, reported that 22% of its invested assets for the year 2010 came from the Asia Pacific region. And we believe this number would have crossed 25% for 2011, due to an outflow of funds from its clients in the European region.

Pu believes that the Asian economies are in better shape than those in the west, and are better poised to recover this year. While he cautions that a collapse in Europe can no doubt have an adverse effect on these economies, he sees a great sign in that most Asian countries are now looking at reversing interest rates. As this indicates that the rates in these regions have peaked, this would mean the Asian equities markets will see growth for the year.

Pu also has a positive outlook toward the Asian debt and currency markets, with emerging market sovereign debt figuring high on his wishlist. While he mentions that the Asian debt market actually gains from the debt crisis in Europe, he also adds that the Asian currencies – because of their being linked to the US Dollar – could take a hit if the euro is substantially devalued against the USD.

Hopefully, this foresight into the Asian markets for 2012 will help UBS improve its wealth management revenues for the year.

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  1. Asia could perform better compared to 2011 :Yonghao Pu, Chief Investment Strategist, UBS Wealth Management, The Economic Times, Dec 30 2011 []
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