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UBS picks China as best for investors in 2019

UBS picks China as best for investors in 2019

China will continue to be a prime locale for global investors in 2019 despite the possibility of worsening tensions with the US on trade, according to UBS Executive Vice Chairperson Catherine Cai.

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By Meili Chen 29.11.2018

China will continue to be a prime locale for global investors in 2019 despite the possibility of worsening tensions with the US on trade, according to UBS Executive Vice Chairperson Catherine Cai.

Speaking at East Tech West on Wednesday, Cai said that she recognized that any negative developments in the long-running China-US trade war will make it difficult for both bond and equity marketers to stabilize next year following a challenging six months. However, she believes that the sheer scale of China’s domestic market will ensure that a “lot of confidence” remains, making the country an attractive outlet for investors regardless of trade developments.

At the event in Guangzhou, Cai said: “I still believe, and the UBS house view also believes, that China [is] still representing the most investment opportunities in the world. Maybe we can conservatively say one of the most opportunities in the world…We still think the next year will see moderate growth in the equity market as well as the GDP [gross domestic product] growth.”

Cai expects investors to derive a great deal of value from keeping Chinese assets in their portfolios despite the specter of further trade tariffs. US President Donald Trump said earlier this week that he is “highly unlikely” to delay the arrival of higher-rate tariffs in January and could even introduce further 10% levies on luxury goods such as iPhones and other connected devices.

Trump is set to meet Chinese President Xi Jinping in Argentina at the G20 Summit within the next few days, and while there are slim hopes that the two leaders can establish an agreement and lay the foundations for a new trade deal, many commentators expect the standoff to run for some time yet.

Cai said that an agreement would be “very positive” for the world’s two largest economies and believes that everyone is waiting in anticipation for “good news.” She added that global markets have been particularly fragile during the last two weeks and that volatility will continue if there is nothing more specific than a mere shaking of hands between Trump and Xi.

In addition, Cai was eager to stress that the trade war has been damaging for both sides and other countries hit by the spillover. She urged global equity investors to pivot toward safer options and other sections of the economy while it plays out. Cai also pointed to the recent tech sell-off on Wall Street as evidence of the negative impact of trade tensions stateside.

She added: “In [the] past two weeks, the US market has turned very soft; a lot of big tech names have lost their market value in a very significant way. Take, for example, Apple have lost $200bn in market valuation. Also, a lot of economic indicators from the US demonstrated the potential softening for the upcoming years...So, I hope the US government also realizes the trade war, more or less, is also going to impact the US economy and not only China's economy.”

Cai also spoke about fintech developments and the recent blockchain and cryptocurrency boom, which government policies and a lack of transparency has hampered. Crypto exchanges became illegal in China last year, but according to reports from East Tech West, the government now wants to be a blockchain tech leader while not endorsing crypto.

The fintech industry has a chance to really move forward, but that development is largely dependent on the arrival of new regulations, Cai said. She added: “Everyone is waiting for more clarity and transparency on the regulation front in the fintech sector…We hope next year we will have better certainty.”

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