Top Asia Advisers at Morgan Stanley, UBS See China Revival

(Bloomberg) — Two senior executives from Morgan Stanley and UBS Group AG who advise Asia’s ultra-wealthy are seeing renewed investor optimism over China following a weekend truce between the two largest economies.

The breakthrough in US-China trade relations has set the scene for a rebound in growth stocks in America and an imminent “repositioning” in China, said Morgan Stanley’s Christina Au-Yeung in an interview at Bloomberg’s New Voices event Tuesday in Hong Kong. Amy Lo, the Swiss bank’s co-head of wealth management for Asia, noted that interest in China is picking up after several years when clients wanted nothing to do with the market. 

“In recent months, going into some international conferences, they would ask me proactively, what are some of the investment opportunities in China?” said Lo.

US markets are flourishing again amid softening trade tensions between Washington and Beijing, with a “Buy America” fervor sweeping across markets. The Nasdaq 100 is on the cusp of a bull market and the dollar climbed after Donald Trump touted a “total reset” with China following talks that yielded a 90-day pause that met nearly all of Beijing’s core demands. Hong Kong’s benchmark stock index, laden with Chinese companies, has been one of the best performers in the world this year.

The tariff truce “has thrown up very interesting opportunities” in both countries, Au-Yeung said. The US still has “the deepest and highest-quality market,” and valuations in China are “not demanding,” said Au-Yeung, head of Investment Management Services at Morgan Stanley Private Wealth Management Asia, in an interview with Annabelle Droulers.

“We are seeing that certainty really start to improve the outlook for growth names in the US,” she said. With China shifting from being the world’s factory to a global innovator of its own, “we are seeing an emergence of really interesting themes coming back out in China.”

The US is lowering its combined 145% levies on most Chinese imports to 30% for 90 days. China agreed to slash its 125% duties on US goods to 10%, and remove other countermeasures taken against the US since April 2.

Au-Yeung said her team had anticipated a swift de-escalation in tariff tensions, which indeed “has come in thick and fast.” However, she acknowledged that the 90-day window is short, suggesting it may be challenging to strike a comprehensive deal within such a tight time frame.

While the bank is still targetting an annual 7% to 8% total return for its ultra-high net worth clients over a seven to 10-year horizon, it is “significantly harder work” to achieve that return as volatility is much higher now than in the post financial crisis era, she said.

She’s recommending her wealthy clients have a 40-40-15 split among fixed-income, equities and alternatives, with the balance in cash and cash equivalents for their global asset allocation. 

Still, UBS’s rich clients are increasingly shifting away from US-dollar assets, turning to gold, crypto and China, Lo said in an interview with Yvonne Man at the same gathering. “Volatility is definitely here to stay,” she said.

Brewing trade tensions between the US and China are prompting investors to diversify their holdings, which have traditionally been “quite US-centric,” she said. In addition to seeking out other currencies, they’re putting more money into crypto, commodities and alternative assets. 

“Gold is getting very popular,” said Lo, who’s been with UBS about 30 years. 

  

While the de-escalation has improved market sentiment, Morgan Stanley has seen changes in client behavior too, especially in Asia, where entrepreneurs and asset owners are shifting from “outright outperformance objectives to a much more conscious risk budgeting approach,” Au-Yeung said. 

“We’ve seen our clients become much more conscientious about the risks and exposures that they’re taking, much more judicious about volatility, budgeting and having a very clear and set idea for what each part of the portfolio is designed to achieve,” she said.

As markets soared on a truce in the trade war, Citadel founder Ken Griffin reflected on the past month, suggesting it would have been better to sit on the sidelines in cash, he said in an interview late Monday for an upcoming series for Bloomberg Originals, Bullish. 

To Au-Yeung, navigating market volatility amid historic geopolitical tensions is like drifting a car—unpredictable, powerful, and demanding precision. In the wrong hands, things can quickly spiral out of control.

“I like to drift cars,” she said, when asked about her hobby. “You don’t have to use a steering wheel to move the car in exactly the direction that you want to. You just use the throttle, and the better you are at feeling that throttle, the better you are at navigating that machine. I think that’s something that we can all apply in our work and what we do.”

–With assistance from Yvonne Man, Annabelle Droulers, Joanne Wong, Paul van Deventer, Aarti Jitender and Heba Moussa Von Thun.

(Adds comments from Morgan Stanley at end)

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