UBS, HSBC Advise Top Clients to Buy Asia Stocks Amid Equity Rout

(Bloomberg) --

The rout in Asian equity markets this year has not been for the faint-hearted. Yet, investment experts at private banks say it’s time for clients to indulge in a bit of bargain hunting.

Wealth managers such as UBS Group AG and DBS Group Holdings Ltd. are recommending clients dip their toes in structured products based on regional stocks, while Bank of Singapore Ltd. has upgraded Asia ex-Japan equities. Concerns about the health crisis’ economic repercussions have wiped out $5.5 trillion in Asian stock-market value since Jan. 20 when traders began reacting to virus fears. The region’s benchmark index, which snapped a four-day advance to fall 1.8% as of 11:35 a.m. in Singapore, is set for its worst quarter since 2008, led by energy shares.

While the past week’s rebound has failed to convince most investors that the market has hit a bottom, private banks are not sitting idle. Here’s what investment chiefs are recommending to clients.

UBS

“Look for oversold names,” Kelvin Tay, the Asia Pacific chief investment officer for UBS’s wealth-management unit, wrote in a note Wednesday. Historically low valuations for regional stocks excluding Japan are offering opportunities in companies related to online consumption, such as gaming, e-commerce and food delivery, he added. The Swiss bank is also recommending China property shares listed in Hong Kong, Japanese automation and machinery companies and 5G-related firms.

In an interview earlier this month, Tay said investors can consider structured products such as equity-linked notes and reverse convertible notes on Singapore bank stocks for lower “entry points.” “You are talking about banks yielding 6% and a tier-1 capital ratio of about 15% -- you can’t get it anywhere else in the world,” he said.

DBS

“We are quite near the bottom in Asian equities,” said Hou Wey Fook, DBS Bank’s chief investment officer, pointing to valuation indicators trading near historical lows, implied volatility levels, and “playbooks from SARS” and the global financial crisis. Within the region’s equities, the Singapore-headquartered bank favors China shares.

Clients have been investing in beaten-down Singapore real estate investment trusts and health-care stocks by purchasing securities or structured products enhancing yields, added Joseph Poon, group head of DBS Private Bank. He said there’s been an up-tick in clients’ trading volume this year.

Bank of Singapore

Attractive, long-term opportunities have emerged in Chinese, Hong Kong and Singaporean equities, Bank of Singapore Head of Investment Strategy Eli Lee wrote in an investment update Friday, upgrading the three markets as well as Asia ex-Japan stocks to overweight from neutral.

China, Hong Kong and Singapore are “at the forefront” of controlling coronavirus infection rates, and policy makers are “capably” implementing stimulus measures, he said, adding that shares such as Alibaba Group Holding Ltd. and Tencent Holdings Ltd. are on the Singapore wealth manager’s buy list.

HSBC

According to Patrick Ho, HSBC Private Banking’s chief market strategist for North Asia, investors still need to manage the “very weak economic and profit data of the coming weeks and months.” But in the meantime, the private bank is recommending companies with “above average” profitability, strong balance sheets, the ability to pay stable dividends and strong brand presence.

Ho said he has identified such firms in the consumer, technology and telecommunication sectors in Asia as well as China’s real estate.

©2020 Bloomberg L.P.