By Ishika Mookerjee
UBS Global Wealth Management, which oversees more than €2.2 trillion in invested assets, has gone underweight on shares for the first time since the eurozone crisis.
The Swiss asset manager cut its stock positioning relative to high-grade bonds to reduce its exposure to trade wars and political uncertainty, said global chief investment officer Mark Haefele. Risks to the global economy and markets have risen, following a renewed escalation in US-China trade tensions, said Mr Haefele, who had so far resisted turning bearish on stocks since the world’s two biggest economies began their trade feud last year.
US President Donald Trump’s decision last week to increase tariffs on $250bn (€225bn) of Chinese goods to 30% from 25% prompted the downgrade. The change factors in a new underweight position in emerging market stocks, which “are more exposed to heightened market volatility, a slowing global economy, and heightened trade tensions”, said Mr Haefele.
He cautioned “against large equity underweights” and maintained his view that the US can avoid a recession in 2020.
Earlier this month, the bank more than halved its 2019 earnings forecast for Asia to 2.8% from 6.3%, and said Taiwan and Korea will likely bear the brunt of the slowdown due to their reliance on trade and technology.
Paul Sandhu, at BNP Paribas Asset Management, said he expects fund flows to return to Asia if the US-China trade situation “comes together”.