UBS Asia Pacific chief looks to digital and green economy

The brave new world after the coronavirus crisis will see a highly digitalised economy that is also greener and more sustainable, said UBS regional chief Edmund Koh.

Mr Koh, who is president of UBS Asia Pacific, added that some industries such as aviation, travel and entertainment will find it challenging while others such as e-commerce and logistics might thrive.

He told The Straits Times in an exclusive interview: "We have always maintained that some industries would do well, such as e-commerce, high technology like 5G and automation, logistics like delivery services, health and those related to environmental, social and governmental (ESG) sustainability."

The crisis has sharpened the overall focus on these sunrise segments.

"Now is the time for clients to relook at existing industries that might not be there in the new normal or perform lower than before. It is a good time for investors to re-calibrate their portfolios," he said.

Industries that are going through a rough patch now include aviation, hotels, travel and entertainment.

Mr Koh said: "Much as people say they really want to travel, now they are getting used to meeting virtually.

"Habits will alter after this crisis and it will affect aviation and transportation."

He added that upstream oil and gas and discretionary consumer industries might find it challenging to get back on their feet.

Automakers will also be affected, as unemployment rises globally and the outlook is bleaker, causing fewer people to change cars. Other impacted segments include advertising, property and construction.

"Financial services will find it a challenge. Rates are low and banks make less money. With unemployment, credit losses for banks might also pile up if people are unable to pay back."

But industries related to digital tools, such as e-commerce and e-sports, will be the next big thing.

Retail that is conducted on online platforms will also see significant pick-up, he predicted, which will boost logistics, warehousing and delivery services, including for food.

But more than anything, sustainability will be attractive in this new world.

Mr Koh said: "Things that have to do with dry cells, energy storage and less fossil fuel will be on the rise.

"Many businesses in the region which are plantation-based are being handed over to the second generation, who are more exposed internationally. They run the business with an attitude of being more responsible to the environment.

"ESG in the region has taken on a more serious note than before. It is not just a trend or a fad."

About 70 per cent of UBS' clients in the region are entrepreneurs who run their own companies.

A common pattern among them is that business is no longer about the bottom line, but that goals include having good sustainable outcomes, Mr Koh, 60, added.

He said that the assets under management for sustainable investment have soared to over US$1 billion (S$1.4 billion) in the Asia Pacific.

"These sustainable investments have seen strong performance in recent years and have actually been outperforming comparable traditional portfolios," Mr Koh said.

The main strategy UBS has for its clients in a post-Covid-19 world is a greater push towards such green investments, the credit space, private markets and industries that are set for growth, such as healthcare and 5G, as opposed to equities.

The next three to four years will see more consolidation and mergers and acquisitions, Mr Koh added.

"Those impacted by the coronavirus crisis will consolidate. Those that are growing will get more capital for their business and it will be quite a seismic shift."

People may also be looking into commodities such as gold and foreign exchange as a good hedge, rather than oil, which will be depressed.

The bank itself is not allowing the coronavirus to put its development plans on hold.

"A pivotal centre we are developing into is China," Mr Koh said.

"Our other two centres in Hong Kong and Singapore are growing very well, with the political stability, stable currency and strong research and development mindset here helping (us) to grow."

UBS's Asia division increased profit before tax by a record 154 per cent in the first quarter, compared with the same period last year. The region also contributed about 31 per cent of the bank's profit before tax - up from 20 per cent previously.

Mr Koh, who divides his time between Hong Kong and Singapore, said that even as the world might get less global and more protectionist, UBS will continue to globalise and China remains a strategic imperative for it.

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