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Singapore March 2013

UBS Wealth Insights 2013

Regional CIO of Emerging Markets. “A Pioneering Spirit for Investing in the Future. Jorge Mariscal and Head of China Economics Research. based on your risk profile. It is our privilege to continue our dialog with you. so that you can choose to make an impact on your investments and follow this up to optimize returns for your portfolio. Welcome to our inaugural annual UBS Wealth Insights in 2013 in Singapore. which aim to provide an insight into which topics are likely to dominate the economic. we can develop your portfolio into a financial strategy and solution which meets your goals and objectives. we are honored to have internationally renowned Swiss scientist. take away concrete themes. Kind regards. and where they share their insights in a relevant manner to help you make better informed decisions in context. together with our panelists and workshop speakers from UBS and outside UBS. Piccard was the first person to fly around the world in a balloon in 20 days. engaging and useful. 2013 Dear Guest. Dr. We aim to provide a platform where the best-in-class speakers from around the globe have filtered. we are bombarded with news and information on all fronts. Dr. whether in the world of investments. whether in relation to socio-economic or economic issues. Within the complexity of the world today. adjusting the composition of your investments according to the changing market conditions. We want you to be able to ask questions. Bertrand Piccard. Edmund Koh CEO UBS Wealth Management Singapore Peter Kok Regional Market Manager for Singapore and Malaysia Carlo Grigioni Vice Chairman of the Division Wealth Management 4 5 . to share his insights with us as a keynote speaker. consolidated. UBS Wealth Insights At UBS. and extract implications for your own personal investment approach and investment portfolio. We look forward to continuing the journey with you and seeing you again at our next UBS Wealth Insights program. are only part of the journey we take with you. This event series was conceived on the back of the need to develop a world-class professional platform for our high net worth clients. He will offer a new perspective and inspiring message. financial and investment world in 2013. whether political. regularly reviewing the quality of your portfolio and your approach. For this inaugural event. Dialog with you This conference and this brochure. these leading market analysts. We hope you will find this conference interesting. We aim also to provide our audience with the opportunity to interact with the speakers. Other speakers providing expert views on key markets include Global Economist Paul Donovan.” thoughts that we do not always get to hear. are all geared towards helping our clients discover investment opportunities in the year ahead. Upon understanding your needs. but his views and principles are useful and relevant to our daily lives. bringing together objective insights from global experts and speakers. Wang Tao. in business or in our personal lives.Welcome Singapore. Even though what the future holds is uncertain. March 11. extracted and analyzed the available information. we want to bring independent insightful content to our audience.

Japan. 10:00 a.m. Peter was responsible for the KeyClient business in Singapore. 1:00 p. Kelvin Tay. with Paul Donovan. India. Andrew Williamson and Ricardo Beninatto.m.Program Hosts Edmund Koh CEO UBS Wealth Management Singapore 9:00 a. Edmund Koh was appointed Group Managing Director. China’s recovery: How long can the good times last? Wang Tao Panel debate Panel debate moderated by Bloomberg’s Haslinda Amin.m. Peter Kok Regional Market Manager for Singapore and Malaysia Peter Kok is Managing Director and Regional Market Manager. which spans more than 20 years in the banking industry. His global expertise and extensive experience in international private banking form the firm foundations for his current role of providing senior coverage to Ultra High Net Worth clients in Asia Pacific.m. Opening note Edmund Koh Pioneering spirit for investing in the future Bertrand Piccard Where in the world are we going? Paul Donovan In February 2012. 12:00 a.m. Workshops 1. Singapore Country Head and CEO of UBS Wealth Management Singapore and APAC Hub (UBS Wealth Management onshore operations in Australia. 6 7 . Mr. with more than 30 years of experience in the Wealth Management business. and garnered a deep understanding of Asian markets in his career. which provides holistic solutions for all KeyClients booked in Singapore. 10:40 a. He is also in charge of FIM APAC. Will their asset markets deliver? Jorge Mariscal 11:20 a. 9:10 a.m. East vs West: Do Asian companies outperform Western companies? 2. He was also responsible for the KeyClient Competency Center in Singapore. Emerging economies look good. Buffet lunch 2:00 – 3:00 p. Edmund has built a strong track record in leading and building successful businesses. Grigioni is one of the most senior leaders of UBS Wealth Management & Swiss Bank globally.m. Investing in a yield-hungry world: Our high-conviction calls in Asia 3. Prior to his current role.m. Singapore and Malaysia in UBS Wealth Management Singapore. He began his career with UBS in Asia Pacific in 1986 as one of the original architects of the region’s Wealth Management business. and Taiwan). Investing my money in 2013 Carlo Grigioni Vice Chairman of the Division Wealth Management Mr.

8 9 . motivation. adventurer. His balloon flight achieved the longest flight in terms of both duration and distance in the history of aviation: 45. Founder of the “Winds of Hope” humanitarian foundation. humanitarian. renowned inspirational speaker Dr. Auguste Piccard. uncertainty and crises. he is European champion in hang glider aerobatics (1985). 1958 in Lausanne (Switzerland). scientific and sporting associations. Bertrand Piccard is the winner of the first transatlantic balloon race. his grandfather. Jacques Piccard. first nonstop round-the-world balloon flight (together with Brian Jones) – “Around The World In 20 Days. aeronaut. Always pushing the boundaries. The Olympic Order. A pioneer in hang gliding. He is also an Honorary Professor at Guatemala’s Franciso Maroquin University and an Honorary Doctor of Science and Letters. Official decorations: Légion d’Honneur. 21 hours and 47 minutes (seven world records). He was awarded the highest distinctions of the Fédération Aéronautique Internationale. Piccard specialized jointly in psychiatry and psychotherapy for adults and children. he is also Goodwill Ambassador for the United Nations Population Fund (UNFPA).755 kilometers in 19 days. dived to the deepest point in the oceans. pioneering spirit. he became the first man to succeed in the record-breaking. human communication. Piccard is a lecturer and supervisor for the Swiss Medical Hypnosis Society. team-work. A senior consultant in a psychiatric hospital. he illustrates his concept of the psychology of life. psychiatrist. the Explorer’s Club and other aeronautical.” Using his aerial exploits as a backdrop. Born March 1. His doctoral thesis entitled “La Pédagogie de l’Epreuve” was awarded a prize by the Faculty of Medicine at Lausanne in 1996. as well as how to deal with stress. the National Geographic Society.Speakers Main speakers Bertrand Piccard Scientist. was the first person to explore the stratosphere and invented the bathyscaphe with which his father. Gold Medal of the French Ministry of Youth and Sport. An expert in hypnotherapy.

Paul also co-authored “From Red to Green? How the Financial Credit Crunch Could Bankrupt the Environment” and regularly appears on CNN. Tao Wang was Head of Greater China Economics and Strategy at Bank of America. Wang Tao UBS Investment Bank Head. Dr. Tao Wang received her PhD in Economics from New York University and her bachelor’s degree from Renmin University. and CNBC television stations. responsible for studying China’s macroeconomic development and structural reforms. New York based asset manager focused exclusively on the global emerging markets. where he coordinated the firm’s emerging markets investment research products and served as Chief Equity Strategist for Latin America. joined UBS in 1992. a multibillion-dollar. Prior to joining the company. He is also Economic Advisor to the development charity of East London Business Alliance. Dr. Jorge earned a BA in economics from UAM University Mexico City and a PhD in development economics and international finance from New York University. monetary policy and exchange rate trends. Senior Global Economist. sitting on its investment committee and development board. she was a senior economist at the International Monetary Fund (IMF). Paul Donovan. and a co-founder of the Peter Culverhouse Memorial Trust. Dr. Emerging Markets Based in New York. Paul has an MA in Philosophy. Managing Director Based in London. Politics and Economics from Oxford University. Prior to joining UBS. Tao Wang is Managing Director. China Economics Research Based in Hong Kong. Mariscal UBS Wealth Management Regional Chief Investment Officer. Head of China Economics Research at UBS. and head of Asian Economics at BP. Jorge was a partner and Chief Investment Strategist at The Rohatyn Group. Jorge O. and published a number of research papers. He is an honorary fellow of St Anne’s College. She also worked as the chief Asia economist at DRI/McGraw-Hill (currently Global Insight). Tao Wang was involved in program negotiations and annual consultations with many member countries. Dr. Bloomberg TV.Speakers Speakers Main speakers Paul Donovan UBS Investment Bank Senior Global Economist. He holds an MSc in Financial Economics from the University of London. During the eight years she spent at the IMF. Oxford. and to present the bank’s global views to its clients. and energy market developments in those positions. Jorge also teaches emerging financial markets at the SIPA School of Columbia University. Beijing. She led the coverage on China’s macroeconomic development. 10 11 . Jorge O. UBS Investment Bank. a charitable fund that raises money for cancer research and patient care. and is a member of the Vice-Chancellor’s Circle of Oxford. Mariscal leads the development of UBS WM investment views on emerging markets across different asset classes and geographical regions. Jorge was a managing director at Goldman Sachs. Before that. He currently works with all economists and macro-strategists at UBS to identify the global trends that emerge in the world economy.

Prior to joining UBS. at UBS. Southern APAC Since April 2012. Kelvin is a regular guest host on CNBC Squawbox and appears frequently on Bloomberg TV. and communicating these views to our clients and client advisor base. Haslinda has been at the heart of market makers and stories that have driven the transformation of Southeast Asia. Investment Strategist Asia Pacific Head.Speakers Speakers Panel discussion Haslinda Amin (moderator) Bloomberg Television Correspondent. Andrew graduated from Brighton College in 1986 and is a CFA charterholder. Prior to working with UBS. Managing Director See full biography under “Main speakers” Ricardo Beninatto UBS Wealth Management Executive Director. Andrew is a member of the UBS Wealth Management Global Investment Committee representing the Asia region. analyzing overall market developments in addition to the general market outlook. where he is an integral part of the wealth management investment process and the UBS House View. in 1999. Andrew Williamson UBS Wealth Management Head. to effectively deliver investment insights across asset classes. Kelvin received his MBA from Imperial College. He is also responsible for the Asia ex-Japan equity strategy. Before joining UBS he was a Director for Emerging Markets at Bank of America in New York. developments in Pakistan as well as President Barack Obama’s first visit to Asia. ChannelNews Asia and BBC World. Ricardo was a proprietary foreign exchange trader at Banco do Brasil in Rio de Janeiro. Advisory Products Asia Pacific. Paul Donovan UBS Investment Bank Senior Global Economist. Andrew worked for Lloyds Private Banking (1986/87) and Coutts (1987 – 2004). University of London. Rio de Janeiro. He also holds a Bachelor of Social Science and Bachelor of Arts from National University of Singapore. Kelvin held numerous responsibilities at Deutsche Bank Private Wealth Management (Asia) and was a regional telecoms analyst in JP Morgan and ABN AMRO Securities. Haslinda graduated from the National University of Singapore. Brazil. Kelvin Tay UBS Wealth Management Regional Chief Investment Officer. 12 13 . and completed his MBA at New York University’s Stern School of Business. Southern APAC. Ricardo holds a Bachelor of Science in Economics from Faculdade Candido Mendes. Investment Products & Services Ricardo has been with the UBS Active Portfolio Advisory team since January 2005. majoring in international politics and English language. Kelvin is the Regional Chief Investment Officer. Anchor Haslinda Amin is a news correspondent and anchor for Bloomberg Television. He has been a Fellow member of the Securities Institute (UK) and in 1997 was awarded the London Stock Exchange Special Achievement Award by the institute. Prior to this. as a senior equity trader for four years. the bloody antigovernment clashes in Thailand. Based in Singapore. after working for the Bank’s Proprietary Desk in Sao Paulo. Investment Products & Services Andrew and his teams across the APAC region are responsible for linking and positioning appropriate investment solutions alongside the UBS house investment view. Brazil. She has reported on financial and political developments including the Asia-Pacific Economic Cooperation forums.

including mutual funds. William E. Asian Equities James Thom is an investment manager on the Asian equities team. 14 15 . Prior to joining the firm in 2007. and public funds in the New York. wholesale. covering a broad range of top-tier asset managers. William was in institutional equities for seven years at Morgan Stanley. the emerging markets Private Equity firm. Connecticut and Midwest regions. an MA from Johns Hopkins University and a BSc from University College London. Morgan UBS Global Asset Management Executive Director. and third-party prospects as well as investment consultants around the world. hedge funds. William holds a Bachelor of Science from the University of Wisconsin (US) and an MBA from Northwestern University (US). James graduated with an MBA from INSEAD. based in Singapore and covering Southeast Asia. James joined Aberdeen in 2010 from Actis.Speakers Workshop 1 East vs West: Do Asian companies outperform Western companies? James Thom Aberdeen Asset Management Investment Manager. insurance companies. Client Portfolio Manager William is responsible for representing the firm’s growth equity strategies to institutional.

Asia-Pacific at Merrill Lynch. where she headed up the institutional rates sales team. as well as individual stock selection within the Asian region. She has been a CFA charterholder since 2002 and holds a Bachelor of Business (major in Financial Analysis. Wei Mei has been a fixed income portfolio manager with Fullerton Fund Management Co. Washington College of Law. and minor in Economics) from Nanyang Technological University and a Master of Science (Financial Engineering) from National University of Singapore. whose activities include investment content and securities selection. Over the last 17 years. Investment Products & Services Hui Hoon is responsible for managing fixed income for IM APAC’s Discretionary Mandates. Yuh Harn is an award-winning fund manager with accolades from S&P Singapore Fund Awards and The Edge-Lipper Singapore Fund Award.Speakers Speakers Workshop 2 Investing in a yield-hungry world: Our high-conviction calls in Asia Eric Sandlund UBS Wealth Management Head. focusing mainly on Asian credits and local currency markets. She started her career in corporate finance at Temasek Holdings in 1999. Singapore. Wei Mei is a Chartered Financial Analyst (CFA). Wei Mei was in investment banking at Credit Suisse and JPMorgan Securities in Hong Kong. 17 .Sc in Business Administration majoring in Finance. She was headhunted to join HSBC Global Markets. Harn was with BNP Paribas Wealth Management Singapore. including Managing Director. Fixed Income Portfolio Management. Harn graduated from Hawaii Pacific University with an honours degree in B. Hong Kong. Chief Investment Officer. Investment Management APAC Harn is a member of the Asian Equities team that decides on country strategy. He was also Regional Managing Director / CIO at Prudential Portfolio Managers Asia. mutual funds and alternative investments. Investment Products & Services Eric leads the Investment Management team. marketing and distribution. Managing Director / CIO at Jupiter Tyndall (Asia) Ltd. Certified Public Accountant (CPA) and Chartered Alternative Investment Analyst (CAIA). 16 Yuh Harn Tan UBS Wealth Management Director. Wei Mei Tan UBS Wealth Management Head. Phillip Capital Management and SG Asset Management. Prior to joining UBS. Prior to joining UBS. Investment Management APAC. She has extensive experience covering professional clients and sophisticated UHNW investors across 20 countries. Eric oversees a regional shelf of discretionary portfolio solutions investing in equity. product development. Hong Kong. where she launched and managed the Fullerton Short Term Interest Rate Fund. and Temasek Holdings in Singapore. She specializes in asset allocation and portfolio construction and leverages on the expertise of more than 900 investment experts globally. Hui Hoon Goh UBS Wealth Management Head. Prior to joining UBS in 2008. fixed income. Mandate Specialists Singapore. Asian Equities Portfolio Manager. In addition. She holds a Bachelor of Accountancy from Nanyang Technological University in Singapore. sector allocation. and Investment Manager at Chase Manhattan. She then moved on to Fixed Income portfolio management within Temasek / Fullerton Fund Management. out of which more than nine years is in the Asian fixed income markets. He is the lead portfolio manager for Asian fund selections. portfolio implementation. Eric is a licensed attorney and received his BA at the University of Virginia and his JD at the American University. Investment Products & Services Wei Mei leads a team of mandate specialists who help clients across the region to structure their investment portfolios for UBS to manage. Hui Hoon has over 13 years of experience within the financial industry. Hong Kong. he has also held portfolio management and advisory roles with Standard Chartered Bank. led by the CIO. Eric held a number of senior roles.

Aline Pacheco UBS Wealth Management Executive Director. which provids investment advisory services to sophisticated and active trading clients. structured products. Previously. Prior to this. focusing on Asian and Special Mandates. advises on asset allocation and provides investment ideas in a portfolio context. After four years he moved to Wealth Management on the Active Advisory team as an FX specialist. Investment Products & Services Aline heads the Direct Access Client team in UBS Singapore. APAC Since 2010 Rajesh has been Head of Active Portfolio Advisory. in particular investment funds. Her past experience includes consultancy to government bodies on asset allocation and fund selection as well as in asset management. In this function he is responsible for advising UBS client advisors and clients on asset allocation and providing investment ideas in a portfolio context. Thomas Kaegi UBS Wealth Management Head. funds. Cherie was a Portfolio Manager at Credit Suisse Private Bank. In 2004. Before joining Investment Advisory. Rajesh is a CFA charterholder and has a Bachelor of Business in Finance from the HK University of Science & Technology. Cherie Wong UBS Wealth Management Executive Director. Jerome holds a CFA charter. Active Portfolio Advisory. bonds. Rajesh joined UBS in 1995 on the FX Institutional Sales desk in the Investment Bank. Jerome Bernasconi UBS Wealth Management Director. Investment Products & Services Thomas Kaegi heads Advisory Products in Singapore. APAC. Investment Advisory Singapore. He is experienced with investments and products across asset classes. where he conducted primary research on Switzerland and Europe. he became Head of the Direct Client Access team in Investment Products. derivatives. Advisory Products. Thomas graduated from the University of St. Jerome worked for 10 years as an investment advisor for UBS Wealth Management in Geneva. Thomas began working for Wealth Management Research in Zurich in 2002. She and her team have been providing investment advice to sophisticated and active trading clients for the past eight years. bonds. which delivers portfolio-based investment advisory services across asset classes to Wealth Management clients. Prior to relocating to Singapore. structures. Investment Products & Services Jerome manages reference portfolios. he moved to the Structured Products Desk and in 2006. Thomas headed the Macroeconomic Research APAC team at Wealth Management Research in Singapore. Gallen in Switzerland with a master’s degree in economics. She holds a BA in Economics from the National University of Singapore and has an MBA from the AGSM of University of New South Wales whilst incorporating an exchange at The Wharton School of University of Pennsylvania. 18 19 . Switzerland. Aline holds a post-graduate degree in Applied Finance and Investment from the Securities Institute of Australia (Sydney). alternative investments and discretionary mandates.Speakers Speakers Workshop 3 Investing my money in 2013 Rajesh Hathiramani UBS Wealth Management Head. Investment Products & Services Cherie has been with the Direct Access Client team since April 2006. Aline was with Credit Suisse as an investment advisor and has experience with various investments such as stocks. alternative investments and FX.

Focused insights 22 24 26 28 30 34 36 Economic overview Ignore the noise – rewards await investors with a sharp focus Global economy After the financial crisis: The world in 2013 Emerging markets Emerging markets: A strategic component in your portfolio China China in focus Additional information: A look at the funds markets in 2013 Offering the best of both worlds The ART of the UBS Advisory Process Please note that the research content featured in this booklet at the time of print is updated as of February 2013. 20 21 . Subsequent post-print updates will not be reflected in this version.

leaving room for further 22 construction that would support GDP growth. and selected emerging-market exposure are particularly suited to such a stance. but this indicator speaks of past trends. our call for emerging markets extends to all asset classes. the situation is not as bleak as it was for most of the past two years. In bonds. the major economies are now moving in the right direction. by definition. the European economy is still shrinking and debt is piling up in almost every country. and so we do not side with the trade-war camp. But although growth risks have receded. US mid-caps tend to have a higher sales exposure to the domestic market than do large caps. As we had expected when we upgraded our call on equities to moderate overweight at the start of the year. In currencies. its second-round effect of lower energy prices could add half a point to the GDP growth rate over the coming years. We expect GDP growth to accelerate until it reaches the new trend-growth rate of around 8% in the third quarter of this year. This makes US mid-caps a worthy addition to investor portfolios. their emerging-market peers that had lagged behind last year’s rally now offer catch-up potential. the domestic “energy revolution” not only creates jobs in direct exploration. and debt ceiling have failed to blow the economy out of its growth path. economic improvement in heavyweights such as Brazil and Russia has bolstered our call for emergingmarket equities. Head UBS CIO Wealth Management Research APAC the worst of the crisis. To put matters in perspective. two pillars of growth stand out. Further ahead. Beyond Asia. and. We maintain our preference for the US in our global equity strategy. It is therefore hard to argue that the yen’s recent devaluation has been excessive. but new supply has barely caught up with the formation of new households. Emerging markets: The broader the better After a long and suspenseful wait. Our focus areas of US mid-caps. Europe: Climbing out of the woods At this point. our other market preference next to the US. Chinese value stocks. For now. a selection of mostly European and some US companies with the most competitive exposure to the world’s fastestgrowing regions. In fact.Economic overview Ignore the noise — rewards await investors with a sharp focus By Hartmut Issel. Ireland and Portugal have even returned to the bond market. Europe. others have come to the fore. foremost of which is whether Japan’s spectacular weakening of the yen could trigger trade wars. is certainly in better shape than it was two years ago. we favor a broader emerging-market exposure now that Asian currencies have made significant gains against the US dollar. Unemployment is still very high. especially those that already have a broader US equity exposure. which implies that the continent may emerge from Why wait? An environment of broadly improving economies warrants a modest pro-risk investment stance. giving investors the best of both worlds. Though it cannot be denied that some areas are still in crisis. offer a better long-term growth outlook. This trajectory suggests that investors should focus on stocks that have taken a beating but have only partially recovered – the premise of our China value focus theme. we like USDdenominated corporate bonds which continue to offer decent yield pick-up to benchmark bonds. even more so now that so-called “safe havens” such as developed market sovereign bonds earn meager returns and may lose out even at the slightest increase in interest rates. Amid the growing noise. it has become more important for investors not to lose focus. the political shenanigans around the fiscal cliff. Japan’s major trading partners seem to agree that the answer is no. the yen is still around 15% stronger against the US dollar and 20% against the euro than it was at the onset of the financial crisis. Interest rates in Latin America and Eastern Europe now also offer higher rewards. more important. While Asian currencies still have appreciation potential. it is worth remembering that their central banks historically respond to rising prices by allowing some currency appreciation. The cyclical recovery aided by more-relaxed bank lending also plays a part. China’s long-awaited acceleration has finally arrived. Debt accumulation has slowed and some countries in the periphery have managed to lower their funding costs. budget sequestration. The revival of housing construction has already started in 2012. and investors may wish not to wait until everyone in the market agrees that the coast is clear. These companies combine the pricing power afforded by their strong brands with the growth advantage they get from emerging markets. And with inflation coming back in emerging markets. They also tend to benefit more in a cyclical recovery such as the one we are in now. 23 . Forward-looking indicators are still rather anemic but have reached bottom. And in Asia. We like the US IT sector. economic indicators have pointed to a gradual global recovery. and that the economy may at least stop shrinking towards the end of the year. In the US. A safe play on European investments may thus be in Western “winners’ from emerging markets” growth. US: Housing and energy renaissance In spite of concerns that the US government’s attempts to pare down its sizable budget deficit might dampen the economy. China has found its footing and economic activity has been improving since the end of last year. Yet. but we also advocate the idea of being fully exposed to the country’s robust economic backdrop. while still mired in a crisis.

The banking system of the Euro zone is simply not in a position to provide the credit growth that one would associate with a normal level of economic activity. Domestic demand in Asia Asian growth is likely to remain relatively inward-looking. The slow recovery of the United States is supported by several factors. and a likely bail out of Spain. The global picture is therefore a more benign continuation of the trends we saw in 2012. For financial markets the risk of a Euro break-up has receded significantly and removing that risk premium has allowed risk markets to rally – but by now this process has probably concluded. it is essentially domestic demand that is driving the Asian region. Managing Director. Political noise. 25 . This year offers specific clear political events that are likely to attract investors’ attention. Politicians can blame their economic ills on foreigners (who by definition do not get to vote for them). Politicization of economic matters The lingering damage of the global financial crisis has resulted in an increased politicization of economic matters. it is hard to see growth in the Euro area being anything other than flat this year. Unemployment is rising in many Euro area economies.” However currency movements can create as many economic problems as they solve. This rising politicization adds considerable uncertainty to financial markets – political risk is hard to predict. a very different picture is in evidence. The main incremental positive news is likely to come from exports to non-Euro European countries and to the United States. The United States has yet to post an above-trend growth number in the wake of the crisis. Consumer credit is rising at a normal level. currency down. Incomes for those with a job are rising. and it is weaker. as domestic political considerations may influence Germany’s approach to Euro-wide issues. Slow investment is preventing a complete return to trend growth. it often has unforeseen consequences. This limits the read-through of Asian growth to the rest of the world. The damage wrought by the global financial crisis has not yet been fully repaired. This also accounts for the slow recovery of the labor market. albeit cautiously. Hopefully the noise about currency markets will die down as the year progresses. “Currency up. Unemployment and sluggish growth are never popular with voters. The stabilization of the housing market. and markets are bad at incorporating political risk into asset prices. 24 A lot of noise about currency markets This politicization has also spilled into some hysteria about “currency war. while simultaneously portraying themselves as defenders of the national interest to their own electorate. UBS Investment Bank The world continues to follow a slow recovery path in the wake of the most significant economic downturn in eighty years. Perhaps most importantly. when set against this backdrop.” For a politician. This is significantly reducing the ability of the European Central Bank to influence economic activity (money is printed. Flat growth in Europe In the Euro area. The simplistic idea that weakening a currency will always help an economy is out of date. Although global trade levels will improve somewhat with the slow but steady improvement in US consumer spending. it can give instant gratification: “I promised to weaken the currency. good” is a simple concept. This has kept unemployment higher for longer in most of the developed parts of the world. but the banks will not do anything with it when they get it). and the global economy has managed only the most fleeting of moments when spare capacity was eroded. focusing on currencies is often desirable. although perhaps less extreme than last year. Senior Global Economist. With fiscal austerity enforced either by market discipline or by inter-governmental agreement. preventing expansion. Banks are still reluctant to lend to small and medium-sized businesses (which have no alternative sources of capital). The German elections in September are also a concern for markets.Global economy After the financial crisis: The world in 2013 By Paul Donovan. Weakening a currency does not necessarily benefit exporters (much depends on how exporters price their goods when selling to their customers). The Euro area has to deal with the consequences of a bail out of Cyprus. The Euro zone remains mired in its financial system problems which will keep its growth essentially flat. bad. A slow growth recovery continues for much of the world. creating job insecurity and increasing consumer caution. Slow recovery of the United States The global economy is likely to experience divergence in 2013. Vote for me. The exceptions to this trend are the commodity producers that supply Asia’s domestic demand. In the United States the ongoing debate over fiscal policy is likely to create some concerns. is likely to provide a solid foundation for consumer spending. A weaker currency may raise import costs and damage domestic consumer confidence. will continue to add an element of uncertainty. The banking system is once again prepared to offer credit. In Japan the politicization of monetary policy in particular has become overt (and deeply worrying from an economic perspective). Asian domestic demand is not a major driver of exports from Europe or the United States (as a lot of the goods that are exported to Asia are then re-exported to satisfy domestic demand in other parts of the world).

EM corporates have overtaken sovereigns as the main issuers of new USD-denominated EM debt since 2003. however. This. and superior growth prospects in EM economies. we believe EM currencies. UBS WM Many investment managers focus on developed regions at the expense of those with greater potential for growth.5% in USD terms over the next six months. The growth differential between emerging and advanced economies is also forecast to widen in favor of EM. the Federal Reserve. EM corporate bonds’ relatively short duration offers some protection against rising US Treasury yields. The European Central Bank. The first is that in a world prone to acute bouts of risk aversion. 27 . major currencies such as the US dollar. the trend of appreciation could be interrupted by periods of volatility. This is especially so in an environment where fundamentals of emerging economies today have improved vis-à-vis developed economies. and corporate bonds remain relatively attractive asset classes. in turn. on average. Faced with abundant supply from central banks. should support equity market performance in the medium term. and their currencies should appreciate against the majors as sovereign balance sheets rebalance. We believe EM corporate bonds’ valuations are not in line with their attractive fundamentals. Currently. given improved economic prospects and lower trending financing costs. This instinct to favor the familiar over the unknown. and thus do not have to print as much money. we believe EM equity valuations are attractive on a price-to-earnings ratio of 10. which has improved the liquidity profile of the asset class. Equities riding on superior economic growth Higher average EM growth prospects should also translate into higher average corporate earnings growth. they have gained better access to capital markets. Emerging economies largely fall into this category.1% in 2012. with lower levels of debt.Emerging markets Emerging markets: A strategic component in your portfolio By Jorge Mariscal. we believe the asset class is still in a healthy growth mode. Rapidly rising incomes in the emerging markets are catapulting around a hundred million people each year out of poverty and into the emerging middle class. Investors based in developed economies also tend to underweight EM due to a general human tendency to invest in what is familiar. EM growth is on an improving trend this year and should benefit EM corporate bonds which are of a relatively cyclical nature. Regional CIO Emerging Markets.1% in 2013 from 3. Furthermore. the flight to safety favors liquid currencies.5% in 2013 from 5. Western consumer goods manufacturers that already have a large market share in the emerging markets are one group that will profit from this growth. While increasing leverage can become a risk concern at some point. The IMF forecasts real GDP growth in EM accelerating to 5. with central banks intervening to prevent appreciation. EM corporate bonds trade at a discount to developed market corporate bonds of equivalent credit fundamentals. Corporate bonds a growing market Another asset class for investors to tap into the EM growth story is EM corporate bonds. long-term appreciation trends will emerge for most of them. moderate inflation and better fiscal accounts. respectively. equities. That said. The second is that many exportoriented emerging countries fear that stronger currencies will compound already weak external demand. We expect this trend to continue as emerging economies undergo a cyclical rebound. not necessarily those with the best fundamentals. uncertainty about growth can increase volatility. This has resulted in impressive economic growth and fast-growing markets for consumer goods. can lead to investors missing out on growth opportunities elsewhere.8% in 2012. Yet.6x for the world and the US stock markets. EM corporates have registered lower credit default rates over the past five years compared to US corporates. The main reason for this is that emerging markets (EM) have historically been associated with instability and uncertainty regarding economic and political developments. and the Bank of Japan have all announced or expanded quantitative easing programs intended to support asset prices. we are not fundamentally concerned about the outlook for EM corporate debt. In fact. These assets are also underrepresented in most clients’ portfolios. At the same time. they face two short-term headwinds. However. the euro. and the yen. Currencies an underappreciated asset class In recent times. and to overvalue domestic assets over international ones. as we do not expect policy rates in the US to be raised over the next 6 – 12 months. As a result. while we are positive about the outlook for EM currencies over the medium to long term. While investors should take these short-term considerations into account when structuring their exposure to different EM currencies. As EM corporates have markedly improved their balance sheets in recent years. abundant liquidity from major central banks. Against the backdrop of low interest rates. however. These major currencies are likely to depreciate against currencies of countries that do not face the need for deleveraging. as we expect EM equities. We expect a base case return of 4.2x and 13. to outperform developed market equities. we have witnessed a great deal of activity among the central banks of the main developed economies. face downward pressure over the medium to long term. We expect these interventions to 26 eventually weaken their currencies against those of certain EM economies.5x 12-monthforward consensus earnings. compared with equivalent multiples of 13. we believe that over time. we think that EM will have the edge over industrialized nations with regard to equity investments. Over a longer-term horizon. In the near term. to 4. local consumer goods and service providers will also benefit from the extremely rapid growth of the middle class in these markets.

UBS Investment Bank China’s economy has been recovering. with RMB loans growing by about 8. liquidity is likely to be tightened. supported by local governments’ drive to speed up urbanization. in order to change economic structure and boost services and consumption.8%. “Urbanization” may also bring upside risks to property and investment Although still a vague theme. which can help to offset the continued weakness in corporate manufacturing investment. land reform. Therefore. and local governments’ drive for accelerating investment under the “urbanization” theme to sustain the overall economic recovery. As a result. On the reform front: Price reforms and more social spending While the government will likely formulate plans rather than implementing far-reaching reforms in 2013. we think the more likely time would be in H2 2013. We do not expect a wide-spread property tax. as the government gets more concerned about rising housing prices and recovering inflation. to further develop the bond market and open up the capital market. We also believe the government will maintain the current home purchase restrictions in large cities and reiterate its intention to keep property prices under control. In H1. we forecast a moderate recovery in the property sector and sustained strength in infrastructure investment. These policies are generally more positive for consumption and the services sector. Our baseline forecast is for real GDP growth to recover modestly to about 8% in 2013 We believe that the government will pursue a neutral monetary and credit policy in 2013. and seasonally adjusted new credit flows resumed their upward trend as a percentage of GDP after falling briefly in Q4. with shadow banking activity more tightly supervised. there will be more visible risks of credit and property policy 29 28 . Real GDP grew by 7. we see more upside risks to investment and GDP growth in H1 2013 from the credit impulse and a strong property recovery. On the above basis and assumptions. or any significant progress in Hukou reform.9% y/y in Q4 2012.54 trillion RMB. the local governments would mainly want to expand their urban premises and do more investment. to expand the coverage of health care insurance. we expect it to make progress this year with energy and utility price reforms. bringing the annual average growth to 7. or public finance reform in the coming year. Growth in overall bank credit picked up further. Although the earliest possible opportunity for reining in credit will likely be April. Our estimates show that the sequential momentum accelerated further to 8. the end result is likely to be more investment and another property boom. However. and robust rebound in property construction and exports. which is positive for commodity-intensive sectors in the short run. and growth momentum is expected to slow.5 trillion.6% q/q in Q4. funded by land acquisition and sales. Booming credit expansion now brings upside risks to growth in the short term China’s credit impulse picked up further in January after a brief slowdown in Q4. Head. we will see clear upside risks to investment and growth in H1 2013. the central government may wish to “accelerate” the human aspect by providing more public services to migrants and rural populations. the recovery in the property sector. helped by the strong credit impulse in Q3. to spend more on social and public infrastructure.China China in focus tightening later in the year. we expect the strong credit impulse. On balance. an obvious change in the one-child policy. even though exports may remain lackluster during this time. and to expand the business-for-VAT tax reform. China Economics Research. If the strong momentum continues in the next 1 – 2 months. with net new total social financing (TSF) reaching a record high of 2. Later in the year. By Wang Tao.

However. how should Asian investors look to grow their wealth? Paul Stefansson: In the developed world. We then further select core funds that can be kept during multiple economic scenarios. Singapore. On the monetary policy front. If you own a high-yield bond. the US Federal Reserve and many other central banks have lowered interest rates to 0% and printed money to stimulate growth. The core investment funds have shown a reasonable return on investment. Most investors know that investment-grade bonds have very low default rates (i. The easiest way to achieve this is to invest in Asian or emerging market asset income funds that are split between bonds and stocks and yield over 5%. smaller companies. if you only have a few high-yield bonds or stocks then you are playing Russian roulette with your money. The protection will keep you invested in bear markets. via a fund manager interview). In the current global climate. While this is adequate with investment-grade bonds. “This Time is Different” by Kenneth Rogoff and Carmen Reinhart. due to the danger of taking a hit in value should interest rates rise. at UBS we have an open fund architecture and provide access to UBS and third-party funds. 0. the global financial crisis and the subsequent fiscal deficits have raised the debt-to-GDP ratio to about 90%. If investors stay in cash.Additional information A look at the funds markets in 2013 With Paul Stefansson. Once the core is in place. I also expect equities to have an initially higher relative performance. Head of Investment Funds and Hedge Funds. but we do not believe the economy can support equities in the long-term. and Ernest Chan. Asia is one of the fastest growing regions in the world and offers tremendous potential for wealth creation. while the stocks will provide upside. The slower growth and 0% interest rates make investing challenging. Stop playing Russian roulette! Given the higher growth rates in emerging markets. Hong Kong. Asian investors should consider building their core funds with diversified investment-grade corporate bonds and blue chip. Volatility can cause equity performance to swing from being the best asset class in one quarter to being the worst in the next. Satellite funds normally offer relatively more exciting returns. The developed world will have slower growth. contribute to the income stream and provide greater protection compared to equity funds in a downtrend. many investors only invest in a few individual bonds. The elaborate selection process includes quantitative screening and qualitative assessment (e. Head of Investment Funds and Hedge Funds. Balanced funds or multi-asset income funds offer great diversification benefits. Unfortunately. Paul Stefansson and Ernest Chan discuss how Asian investors can better manage their funds in 2013. investors should consider investing more in emerging market bond and equity funds. Fixed income funds will most likely still perform in 2013. as few governments will increase interest rates. there is almost a one in 20 chance that you will lose 100%. when the debt-to-GDP ratio reaches above 90%. The bonds will protect on the downside. Prudent investors can move from fixed income funds into a balance of bonds and equities. Our selected core bond funds are designed to weather an increase in interest rates by either being very short in duration or having the flexibility to generate alpha through currencies. You need to stay committed to your core funds in difficult times to reap the benefits of a healthy relationship and a potential yield of over 5%! What should investors who have bought into fixed income funds do if interest rate cycles change and rates go up? Ernest Chan: There is a high chance that investors could be potentially deterred from their fixed income portfolios in 2013. For example.e. growth slows down by -1% per year. especially in Asia. satellite funds can be added to focus on individual countries such as China. 31 . In the book. The strength of a more balanced fund is that your assets are allocated into bonds and equities based on the return potential of the respective asset class.e.09% per year according to Moody’s Investor Service from 1983 to 2011) and that high-yield bonds offer great yields. In this environment. without compromising return potential in the long term. they are not benchmark oriented and can increase their allocation to high-yield bonds. hedge funds. property and private equity. then they will have negative real returns. but are riskier. Last but not least. In a complex political and global financial environment. high-yield bonds. which tend to benefit from an increase in rates through spread compression. Getting exposure to high-yield bonds through a bond fund is one way to actively manage the risk and generate higher returns. though market expectations may well drive interest rates higher. high-quality companies. 4. how may investors approach their investment decisions? Paul Stefansson: At UBS we use a core satellite investment framework.g. as a bond fund will usually hold more than 100 different bonds.67%). but few investors know the default 30 rate on high-yield bonds is 51-times higher (i.

Unlike many Asia-based investors. countries like Vietnam and Indonesia could be beneficiaries of the current tensions between China and Japan. Making the safe.5% – inflation of 5. I prefer to take a global approach. there’s been a substantial improvement in the economic conditions of these sectors and they could pick up further in 2013. In Southeast Asia. particularly domestic consumption. That is. Investors may thus wish to at least look globally. Country-wise. Taiwan has a lot of exposure to technology. that’s a healthy combination.e. How will you personally position your portfolio in 2013? Paul Stefansson: In my portfolio. I have a core fund position in investment-grade bonds. This should be a sector of interest for investors looking to participate in Asia’s growth story. “If you have five high-yield bonds in the core of your portfolio. Therefore.7% (i. high-yield bonds and equities. you’re playing Russian roulette with your money. particularly when it comes to US research and development. and that is something these markets can offer.” Are there any particular sectors or regions that Asian investors should look to access? Ernest Chan: The high growth figures being posted by Asian emerging markets are being driven by the consumer sector.2%).7% in purchasing power. I think that investment opportunities in the US or Europe look at least as attractive as Asia. In my opinion. Developments in technology have a chain effect and both Taiwan and Korea could see their tech sectors picking up off the back of R&D breakthroughs in the US. Due to inflationary pressures. the investor has lost -4. Foreign direct investment likes stability. investors who want to beat inflation may need to take on additional risk by investing in corporate bonds. comfortable choice by going for investments that you know more about is a natural response. a fixed deposit investor in Singapore earning 0. 32 33 . Limiting yourself to Asia might mean higher regional risk and forgone investment opportunities in relatively inexpensive developed markets. Currently. Is there a common mistake that many investors make? Ernest Chan: I believe that the ‘home bias’ that many Asian investors show – focussing mainly on their home country – constrains their ability to take advantage of opportunities. high-yield bonds and US mortgage-backed securities. I have satellite funds in US property and European banks. but it often means you forego other opportunities. return of 0.Additional information Notes For example. The majority of my long-term core equity positions are in private equity and blue-chip companies (I have held these equity positions for more than 10 years). Finally.5% will have a negative real yield of -4. A sector that has been out of favor for a while is the financial sector – often a leading indicator for economic recovery in Asia – but perhaps a more speculative approach would be to look at the mining and metals sectors.

the UBS client advisor first assesses your risk profile and takes the time to understand your needs and goals. led by professionals who have significant experience investing in Asian markets. By choosing a discretionary solution. if the CIO is positive on the “riskier” asset classes. We want to deliver the best possible returns to our clients but we do not believe in taking excessive risk to achieve this. The teams are made up of professionals who bring with them a great deal of experience in the financial markets. 35 34 . However. UBS Wealth Management Asia-Pacific Finding the time to properly manage an investment portfolio can be difficult. To construct your portfolio. the portfolio manager takes the agreed strategic asset allocation as a starting point and makes tactical shifts into areas where there are perceived to be more opportunities. it is possible to get the best of both worlds. we realized that clients in Asia want to invest in Asia. Another key feature of our investment process is risk management. Discretionary portfolios are well established in the US and Europe. what would it mean for a client with a conservative risk profile holding a portfolio with investments in fixed income only? In many instances. More than that. From this. In Asia alone. meaning active management of the portfolio and more time to spend on the finer things in life.000 companies listed on the region’s stock markets. For example. Eric Sandlund discusses the possible advantages of a discretionary portfolio and the benefits it brings to Asia-based investors. disciplined rebalancing is integral to the way we manage discretionary portfolios. how do UBS’s discretionary solutions differ from other approaches in the UBS portfolio shelf? From our conversations with clients. The actual selection of securities is of course also critical. the core component of a portfolio is to satisfy long-term financial goals. Once this is decided. Our tactical asset-allocation calls are in line with the Chief Investment Office and we work closely with our global offices. The key question here is how much exposure you wish to have to stocks and how much to bonds. portfolio returns are determined by strategic asset allocation. The process starts at the UBS Chief Investment Office (CIO) which formulates macro views of the investment environment and identifies opportunities. The next step is to apply these views to every client. how much exposure an investor chooses to have in stocks and how much in bonds. but mostly they want more time to enjoy life! While every client would like their portfolio to be actively managed. Over the long run. they also realize that this can be extremely time consuming. this would more than likely mean tilting the client’s portfolio towards the sectors within fixed income that typically perform well when risk appetite in the market is strong. And we now have discretionary strategies that offer clients significant exposure to Asia. The portfolio manager will monitor your portfolio and carry out all the day-to-day investment decisions. Although you place the full management of your portfolio in the hands of UBS.’ but the investment story for Asia also happens to be a compelling one. The emergence of the middle class in Asia means that the region has now entered the era of mass consumption and this provides the region with a powerful new engine of growth. all portfolios drift over time and clients may not rebalance their assets as frequently as they should. This is your long-term investment strategy. a strategic asset allocation is agreed upon. The team is a highly experienced one. We make adjustments to the process from time to time but it has always been structured and disciplined. How do discretionary portfolios fit into UBS’s core-satellite approach when constructing wealth management solutions? A discretionary portfolio is ideal as a core investment. Could you further explain the investment process by which discretionary portfolios are managed? Our investment process has been developed from our long and broad experience in managing discretionary portfolios. Are the portfolio managers for discretionary solutions located here in Asia? Yes. For clients in Asia. they want to put Asia at the core of their portfolios. Remember. Even where portfolios are managed in Asia. there is a lot of flexibility in discretionary portfolios. there are over 17.Additional information Offering the best of both worlds Eric Sandlund. What exactly do we buy for our clients’ portfolios? We have specialized investment teams for this. What is a discretionary portfolio? When building a UBS Discretionary Solution. There is a comprehensive range of strategies available and you can change your strategy at any time. themes and risks. What is the growing attraction of discretionary solutions in Asia? There are many good reasons why clients choose a discretionary solution. in other words. we have portfolio managers located in both our Singapore and Hong Kong offices. Our portfolio managers are fluent in both English and Chinese. At UBS. Part of this is simply a ‘home bias. Head Investment Management. there is strong leverage from our global platform. You will receive monthly updates of your portfolio and all the transactions will be reflected in your statement. you leave the rest to the experts at UBS.

concentration of an Asset summery (unbundled) Friday. ART allows UBS to benchmark your actual asset allocation and holdings against the UBS reference portfolios as well as most recent research calls. region. Head of Investment Products & Services Asia Pacific In today’s challenging financial markets.Additional information The ART of the UBS Advisory Process issuer or of certain market risk. if there are other potential quality issues in a portfolio. Your client advisors can spot. when and where you want to make your next investment. ART gives you the transparency needed to rebalance your portfolio. particularly in volatile markets. how. To ensure that your financial exposure and investment decisions remain transparent and reflect an appropriate level of risk. your client advisor is better equipped to provide targeted. directly linking our CIO’s opinions on current market opportunities with a wide range of suitable products. u Offers full transparency across all your investments Using this detailed analysis and reporting tool enables your client advisor to present you with substantiated data and accurate benchmarking. Based on the detailed analyses and opportunities identified through ART. available exclusively to UBS Wealth Management client advisors. fixed-income duration. ART can provide a comprehensive overview of your consolidated positions in terms of asset classes and currencies across your different accounts. UBS makes it a priority to provide you with up-to-date information on the quality of your investment portfolio. income projection. UBS has introduced a market-leading Advice Review Tool (ART). via ART. and therefore the ART reports are customizable to include equity sector. 2013 For illustration purposes only. as well as currency-.and geographical breakdown. for example. bespoke solutions to meet your financial goals. u Checks the quality of your investment portfolio It is paramount that you make a conscious decision on the desired risk exposures. How does ART benefit you? u Enables tailor-made proposals for portfolio adjustments ART integrates UBS’s “Research-based Advice” content. across all your assets and positions. In summary. the dynamics and opportunities of your portfolio at the center of attention of our UBS Advisory Process. sector. What is ART? ART is an innovative platform that consolidates relevant information from across all your investments. ART provides the depth and breadth of information needed for you to stay on top of your risks and embark on targeted investments. 36 37 . Similarly. Essentially. or if a portfolio lacks diversification. including your personal asset allocation and potential risk exposure. ART is able to conduct an in-depth and timely analysis on your current positions and levels of exposure. we are putting the health. February 22. which in turn supports you in making fully informed decisions about if. It allows your client advisor to present you with an investment proposal that is well-diversified and benchmarked against the UBS global reference portfolio that best suits your needs and outlook. and credit-rating distribution according to your specific needs. highlighting to your client advisor any specific risks or opportunities in your portfolio. such as holdings in equities that are on the UBS sell list or holdings of unrated or below investmentgrade fixed-income positions. Alexander Kobler. With this data. UBS recognizes that you have diverse and global interests.

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ubs. tapping into our in-depth research and global resources to give you the financial insights you need to take advantage of investment opportunities in the market. To learn more. All rights reserved. Go to www.Asian growth.com/apac-insights-en or scan the QR code with your smartphone. with Kathryn Shih. watch 100 seconds on understanding what wealth management can do for you. Who can help you connect the two? At UBS. . CEO UBS Wealth Management. Asia-Pacific. We will not rest © UBS 2013. Portfolio growth. we have dedicated teams of wealth management specialists around the region.

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