(Yicai Global) Sept. 6 -- Cyclical and growth stocks in Asian equity markets will continue to perform strongly with a favorable policy environment through the end of this year, giving investors good reason to buy more Chinese stocks, UBS Wealth Management Ltd. said in an investment report on hedging geopolitical risks.
UBS Wealth Management is the Union Bank of Switzerland's Chinese financial services arm.
Given uncertainties arising from volatile geopolitical situations and the US Federal Reserve's looming attempt to downsize its balance sheet, market focus will be on Asian companies' strong earnings performance and robust economic data of late, China Securities reported yesterday, citing the UBS report.
In terms of policy environment, all the major Asian economies, excluding Japan, are adopting tepid monetary policies. Six central banks will keep interest rates unchanged or lower them in the next six months, UBS projects. It also pushed expectations for the first Fed rate hike back to December 2017, from the original September forecast.
The report advises investors to continue focusing on relative value and recommends buying more Chinese equities that are included in MSCI indexes, especially financial stocks. Consolidation and substantial capacity reduction in traditional industries will provide support for banks to address non-performing loans and improve asset quality, which will likely lead to higher-than-expected earnings in the banking sector.
UBS Wealth Management will buy more Indonesian and Thai stocks, and less Philippine and Malaysian equities while remaining neutral to Japanese shares, the report added.