Speaking at a lunch in Sydney yesterday, UBS Wealth Management chief investment officer of Southern APAC Kelvin Tay said UBS currently favours US equities, particularly within the industrials, financials and IT sectors.
“Despite the fact US equities dividend yield had close to 50 per cent returns over the last two years, we still think there is upside to this market,” said Mr Tay.
Mr Tay said there is very strong earnings growth coming through, driven by an increase in capital expenditure.
He said this increase in capital expenditure has led UBS to increase its exposure to IT companies, since parts of this increased capital expenditure often flow into upgrading technology and software.
He said while it is unlikely investors will see 30 per cent returns this year, he expects US earnings growth will increase by eight per cent.
The earnings growth from the recent reporting season has been quite good despite the US experiencing one of its worst winters on record.
“Over the last few years we have been driven by quantitative earnings; this year we believe the market is beginning to shift its focus back to fundamentals such as valuations, earnings growth, quality of earnings growth, cash-flow generation,” said Mr Tay.
UBS Wealth management also believes investors should be looking at northern Asian export orientated countries, including Korea, Taiwan, Hong Kong and China, as it expects global exports to increase.
Mr Tay said UBS favours Korea and Taiwan.
“Where the exports cycle is concerned, the technology market is highly correlated with the exports and Taiwan and Korea are highly technology based,” said Mr Tay.
