Neo Teng Hwee, chief investment officer, UOB Private Banking shares his views with Asian Private Banker in ‘The Final Word’, a year in review by the region’s private banking leaders as they share their thoughts and opinions on key issues around industry trends, business performance, investments, regulations, and technology.

Investments | What key investment themes shape your bank’s 2021 outlook — and why?

2020 has been exceptional in more ways than one. From the COVID-19 pandemic to a global recession and extended market uncertainty, the year has been unlike any other in recent memory. As we embark on a new year, UOB Private Bank expects a definitive, albeit uneven, recovery. The pickup will be anchored by the COVID-19 vaccine developments and better control of the healthcare crisis, an improved geopolitical environment in view of a new US administration, as well as stronger investment sentiments. In fact, the latest IMF forecast for global GDP growth in 2021 is 5.2% — a strong upward revision from an earlier forecast of a 4.4% decline in 2020.

That said, the sharp acceleration in COVID-19 cases in recent months and tighter movement restrictions in several major economies will continue to weigh on the global growth recovery. This is why we believe ongoing aggressive monetary policy accommodation and fiscal support are necessary to limit the deterioration of the global economy. We expect central banks in the developed economies to err on the side of reflation, with a proactive lag on improvement in growth conditions, as explained by the US Fed’s adoption of the “average inflation target”. Any premature material rise in bond yields will likely prompt aggressive counteractions by the Fed and other central banks, in the form of bond purchases, to ensure sustained economic expansion.

The uplift in sentiments, coupled with continued fiscal support, will point to a certain, albeit slow recovery of the global economy in 2021. In view of these expectations, UOB Private Bank has upgraded our call on the broad asset class of global equities from neutral to overweight since November 2020. In particular, we have moved US equities from underweight to a neutral position, as we expect the relative performance of US stocks to shift towards sectors which have been most negatively impacted by the pandemic. Growth stocks in sectors such as technology, which are defensive against the economic fallout, are trading at relatively high valuations and could underperform their value counterparts in sectors such as financials, industrials, materials and renewable energy.

Nonetheless, interest in technology will continue and the sector remains an attractive long-term investment opportunity given its cyclical nature. Technology hardware will likely see better performance when they price in the anticipated strong gains arising from a global economic recovery. As digitalisation will continue to change the way we live, work and play, we recommend that investors seek opportunities in technology companies with robust fundamentals while trading at sustainable valuations.

While we have upgraded US equities from underweight to neutral, we continue to maintain our overweight calls on emerging Asia and Japan equities. Investors should also consider shifting some assets from North Asia to Southeast Asia equities which have been the laggards due to the impact of the pandemic.

UOB Private Bank views China’s economic recovery and medium- to long-term growth story as a convincing thematic investment trend. In particular, we see opportunities in China’s technology sector. In its recent formulation of the 14th Five -Year Plan for National Economic and Social Development and the Long-Range Objectives Through 2035, China highlighted that innovation will be instrumental in building a modernised economy. The rapid adoption of 5G technology will present numerous investment ideas and opportunities as China reshapes the global technology landscape.

Amid the continued uncertainties, we continue to advise our clients to remain invested for the long term and to maintain portfolio diversification to manage market and concentration risks.

Meet 2020’s industry leaders in the full round up of of Asian Private Banker‘s The Final Word 2020.