Weekly highlights

Scenario analysis

Scenario

Scenario

Investment ideas

Investment ideas

Description

Description

Scenario

Upside scenario

Investment ideas

  1. Position­ for ­a weaker­ dollar
  2. Invest­ in ­“The Next­ Big­ Thing”

Description

Developed countries’ GDP returns to pre-pandemic
levels by end-2021

Central banks stay accommodative but start reducing asset purchases in 2H 2021 as the recovery beats expectations

Discretionary­ fiscal ­impulse continues support the economy

Lower real rates and a weaker dollar boost global growth over the next 12 months

Vaccine rollout accelerates with sufficient vaccinations done by 1Q, allowing for an earlier lifting ­of­ economic restrictions

A partial rollback of existing trade ­tariffs ­raises global growth

Scenario

Central scenario

Investment ideas

  1. Put cash to work
  2. Invest in emerging markets
  3. Go cyclical for the recovery
  4. Hubt for yield
  5. Buy into sustainability
  6. Diversify­ into ­private markets

Description

Developed­ countries’ GDP­ returns ­to ­pre-pandemic ­levels in 2022

Central banks stay accommodative

Real rates remain low and stable over ­the next 12 months

Fiscal impulse fades moderately and gradually ­as governments ­adapt to economic recovery

Despite recurring outbreaks, public fear is limited, and there ­are ­sufficient­ vaccinations for restrictions to fade sustainably

The US takes a more multilateral and predictable approach to trade policy

Scenario

Downside scenario

Investment ideas

  1. Take advantage of volatility
  2. Protect against the downside

Description

Developed countries’ GDP returns to pre-pandemic levels in 2023 or later

Diminishing ­fiscal­ impulse unable to compensate for economic weakness

Monetary policy remains supportive, but higher inflation raises ­market concerns about earlier than expected tightening

Vaccine availability is delayed, or mutations reduce their efficacy ­substantially

Heightened public fear of COVID-19­ and ­strict restrictions on business activity keep recurring throughout 2021

Growth is hurt by renewed US-EU-China trade tensions

An asset price bubble inflate­s and ­bursts.

UBS House View Monthly

Investing in Asia Pacific monthly guide

Equity highlights

Baidu Sp ADR-A (USD, BIDU US)

Price target: 315 (Inception date: 21/01/2021)

UBS IB has just raised Baidu’s PT to $315, based on solid 4Q20 earnings estimates. Baidu also has a pipeline of new businesses, including its recently announced JV with Geely on autonomous vehicles. Baidu is a major laggard amongst China internet giants with its PER trailing at a ~20% discount while forward PE remains at the low end of peers,. Baidu’s application for a secondary listing in Hong Kong also acts as a near term catalyst, as secondary listings historically lead to a run-up in prices (e.g. Alibaba, JD.com, Netease etc.).

China Life Ins -H- (HKD, 2628 HK)

Price target: 20.9(Inception date: 18/01/2021)

We expect 13% NBV (new business value) growth for China Life in 2021E, with stabilization on COVID impact. The reform agenda likely provides benefits to government-owned insurers like China Life. Despite competition from internet players, limitations of mutual life insurance remain and traditional insurers including China Life are unlikely to be significantly affected. Trading at 0.5x 2021E P/EV (embedded value), China Life's share price underperformed sector by 17% since Q420. We believe current valuation has not reflected much NBV growth recovery in 2021E but has reflected much disruption from Internet competition.

Funds highlights (as at end Jan 2021)

UBS (Lux) Credit Income Opportunities Fund (USD LU2249781621)

Hunt for yield with a taste of Asia

CIO expects bond yields to stay at very low levels for the foreseeable future. While opportunities in the US and EUR credit markets are limited, credit markets in Asia still offer attractive yield potential. Further, for investors with existing bond holdings, such a strategy as a building block could help to enhance the risk-adjusted return for a holistic portfolio according to CIO

  • Diversification across geography, sub-asset class and issuer to mitigate risks such as liquidity and defaults 
  • Provides access to newly opened up onshore China market 
  • Experienced team with extensive expertise drawing on local presence and knowledge of sector specialist teams located in Asia, onshore China, the US and Europe that other managers may not have access to

BGF Next Generation Technology Fund (USD LU2278360750)
YTD: 6.01%

Investing in innovation for the next decade

If the last decade was about investing in the technology sector itself, CIO thnks the next decade will reward investing n the disruptors in sectors undergoing technological transformation.

  • Portfolios today are often exposed to the largest names in the technology universe, despite the fact that disruption and hyper growth often comes from lesser known companies usually those on the cusp of innovation breakthrough 
  • The fund has a 5.4 % overlap with the MSCI ACWI Information Technology Index, showing a differentiated and targeted approach to investing in emerging and disruptive technology names 
  • Lead PM has more than 25 years of experience in the technology sector. The Team’s vast network in Silicon Valley grants them access to emerging and established technology companies, both in the public and private markets

JPM China Fund (USD LU0129472758)
YTD: 8.47%

CIO overweight in China Equity

CIO has upgraded Chinese equities to most preferred due the markets’ recent underperformance, solid earnings outlook and strong macro fundamentals. Our CIO expects the market to regain its strength in the months ahead and therefore sees now a buying opportunity.

  • A “Best Ideas” portfolio of 50–70 China stocks that leverages the comprehensive Greater China research team of JPMorgan Asset Management and Consumer experience. 
  • Off-benchmark allocation to Chinese onshore A-shares can go up to 40% of the portfolio 
  • Growth oriented fund that focuses on businesses with sustainably high returns 

FX structured products highlights

Top trades of the week (as at 23 Feb 2021)

Investment

Investment

Underlying

Underlying

Tenor

Tenor

Coupon1

Coupon1

Strike

Strike

Investment

USD

Underlying

USDCNY

Tenor

1m

Coupon1

3.00%

Strike

6.509

Investment

USD

Underlying

XAUUSD

Tenor

1m

Coupon1

4.00%

Strike

1,733

Investment

USD

Underlying

AUDUSD

Tenor

1m

Coupon1

2.00%

Strike

0.769

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