Asian Banks in Very Good Position, UBS Global Wealth Management Says

Kelvin Tay, chief investment officer for South Asia Pacific at UBS Global Wealth Management, discusses the outlook for Asian economies including Singapore, the region’s financial markets and central banks’ policies, and the opportunities he sees. He speaks with Shery Ahn and Haidi Stroud-Watts on “Bloomberg Daybreak: Asia.”

Uh you haven’t outperform on the asean nations but more on nations that focus domestically and on domestic demand given how exposed externally singapore is what do you make of what’s happening in that economy and how do you rate it as a market as a market player i think the singapore economy is like to do quite well for the next six months at least largely because

Of the fact that you know the domestic reopening has actually been pretty good and we’ll like you said earlier on we’re seeing a lot of tourists we’re seeing the mines industry coming back to life and then on a shorter term basis it’s like it’s actually worked pretty well for us but in terms of competitiveness whether tourism dollar is concerned that might have an

Impact negative impact in the future largely because um you know the things all of this year has been one of the best performing asian currencies i’m so to speak and therefore that might make us a little bit more expensive compared to the rest of the region uh and of course you know with the collapse of the um the aussie the kiwi the rest of the currencies as well

With the exception of the dollar um sigma becomes a pretty expensive destination in that sense so on a short-term basis this growth is going to be strong but i think sometime next year the high interest rates the high interest rates and the stronger currency were probably factor to a certain extent where economic growth is concerned yeah talking about the weaker

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Currencies really japan can’t get a break right i mean we had so much volatility overnight we have the oj governor kariko corolla speaking in dc again today in doubling down on that loose monetary policy how do you rate a market like this when you have a japanese yen that continues to be under pressure because of rate differentials and it doesn’t look like it’s

Going to change anytime soon yeah i don’t think that’s going to change anytime soon not until we get a new governor in any case but the strange thing about japan is that the currency intervention is done by the ministry of finance which obviously is not in tandem with what the boj wants um you know governor garuda has said on many occasions that he’s going to keep

Monetary policy where he is wait it is he’s not going to do anything about the yield control as well that basically means that the the gap between the dollar use and the japanese government bond use will increasingly widen and and after last like cpi data coming out from the us you probably bet that the federal reserve has more room to actually increase rates in

The next couple of policy meetings and now you know increasingly the narrative is likely to shift to whether it’s going to be 75 or 100 business points in november and perhaps another 75 in december as well leading into 50 in january that kind of move is likely to actually widen um dramatically the gap between the japanese yen and the us dollar does it change the

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Differentials when it comes to asia though because with with more of those moves from the fed that increases the threat of financial stability concerns and that obviously impacts the banks would you be preferring the the asian banking names in this environment yeah well the asian bank names are sound because of the fact that they are very well capitalized and on

Top of that the asian banks have a very wide deposit base a very pretty big deposit base so that means that the net interest margins are likely to actually improve further given the fact that most of them are the economies are still doing pretty well they’re not in a recession and therefore they don’t really have to hike up the deposit rates in order to get more

Deposits coming in in order to boost their lending so i think from that perspective the asian banks are in a very very good position but in particular the singapore banks and some of the hong kong banks as well but the problem is at some point the economy will slow down because of the fact that your rates are too high and you know it just can’t be asked to borrow

Anyone i mean how can you borrow and to find an expansion if you’re if it risk that you’re boring it’s going to be at about four and a half to five percent um and you know and global and economic uncertainty is actually starting to set in so i think in the next 12 months i think things are actually okay but i think beyond that the picture gets very very murky

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How constructive are you when it comes to markets like india given that we are expected to see more outflows particularly with the more aggressive fed and one assumes an even stronger dollar yeah india is going to be a tricky market because um you know earnings revisions are done with i don’t think they have actually peaked yet the in the high inflation of the

Higher interest rates go um that’s going to actually affect the earnings of these uh companies are listed there india is not a net exporter it’s a net consumer market so you need to watch the consumption patterns very very closely and i don’t think that’s likely to be positive in the next six months given the fact that your interest rates are rising and there is

No way the rbi can actually can actually prevent that from happening not with regards to what’s happening with the us at this point in time

Transcribed from video
Asian Banks in 'Very Good Position,' UBS Global Wealth Management Says By Bloomberg Markets and Finance