UBS Sees Southeast Asia Whetting Appetite for Tech-Driven Trades

(Bloomberg) -- Southeast Asia’s capital markets may soon welcome more sophisticated products as the region’s mutual fund industry continues to grow at a rapid pace.

That’s the view of UBS Group AG’s head of Asean equities Yeoh Choo Guan who expects assets under management in the region to keep expanding after rising by about 16 percent annually in the past few years. This will make room for tech-driven products such as quant trading and factor investing to take off alongside derivatives and stock lending.

“The domestic funds are actually outgrowing their domestic exchanges,” Yeoh said in an interview in Singapore last week. Funds need to be able to invest offshore or in a more diversified suite of products to generate higher returns, she said.

The fund management industry in Southeast Asia has grown as the region’s burgeoning middle class increasingly entrust their wealth to local institutions. Domestic mutual funds in the region managed a total of $380 billion at the end of 2018, almost triple that of 2011, according to UBS. The bank will hold conferences this week and next in the Philippines and Indonesia respectively where participants will discuss what’s next for the emerging markets.

Yeoh, a UBS veteran, led a team to launch the first A-share trading platform for a foreign brokerage in China more than a decade ago. She is bullish on Southeast Asia’s growth for the long term. While investors are still likely to be cautious this year as they await the outcomes of local elections and global issues from Brexit to the U.S.-China trade spat, the region’s fortunes are only set to improve, she said.

Here’s more on her outlook for the region:

  • Bullish on Indonesia and Philippines after slumps in both markets last year
  • Banks are standout sector that usually lead advance in region
  • Sees scope for more M&A in region and healthy pipeline for IPOs

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