Top of the Morning: UBS Asian Investment Conference takeaways

Hi everyone, Dan Cassidy here. Welcome back to Top of the Morning on the UBS Market Moves podcast channel. Joining me here at the 1285 Podcast Studio in New York, glad to have with me at the table today the CIO for Emerging Markets Americas, Alejo Zerwanko.

Alejo, great to be with you as always. Thank you for dropping by Top of the Morning today. Thank you for having me, Dan.

Great to be here. Absolutely. So Alejo, for the purposes of today's conversation, we are going to focus on the Asia-Pacific region.

Timing's great because a little over a week ago, you did attend the UBS Asian Investment Conference in Hong Kong. So very curious to hear about the experience, what you took away from the conference. Yeah, let me start by highlighting this is the largest conference UBS organizes anywhere in the planet.

So it's a big deal. It actually felt like anybody who tracks economics and finance in that part of the world had to be present at the conference. Terrific lineup with Nobel Prize winners, former prime ministers, and of course, a lot of the homegrown intellectual capital.

I'm talking about 4,800 participants, 400 companies represented, taking altogether $10 trillion of market cap. And the timing was fortunate in a way because as the conference was taking place, if Financial Times headline hit, Hong Kong became the largest offshore wealth hub in the world. Overtaking Switzerland.

So in a way, it felt like Hong Kong, which had been going through a number of rough years, COVID, domestic tensions, is back. The energy was there. You could feel the dynamism and you could also perceive the weight of UBS in that region, the leadership position the company has with banners all over the city, plastered all around.

Fascinating trip, Dan. It does sound fascinating indeed. I'm sure a whole host of topics were covered, though to single one out geopolitics, of course, top of mind for many with so much going on in the world.

Of course, we think back recently to the visit by President Trump to China to meet with President Xi Jinping. Have those meetings helped to stabilize relations? What's your take there?

And how is the investment community reacting to that recent summit? The short answer is the visit did help stabilize relationship, at least in the short term. The overwhelming consensus out of Hong Kong is that at least for the next six to 12 months, we should expect relative calm, relative stability out of the U.S.-China relationship.

This should be underpinned by not only the first Trump visit to Asia, but Xi Jinping should be in the U.S. shortly. Trump should go to Asia after that for the APEC summit. And once more, Xi Jinping will likely come to Miami for the G20 summit.

So you have four opportunities for face-to-face convenings, which given the personalities involved, this is understood to be a good thing for the relationship. Now, at the same time, Dan, nobody's under any illusion that the medium to long-term path of this bilateral relationship is too promising. People do recognize the structural challenges, the deep, fierce competition across geopolitics, technology, finance, and therefore it is probably only a matter of time until things flare up again.

Near term, it's important that we have these milestones before you cited to keep dialogue going that's always constructive and encouraging, Alejo. Maybe another topic we can touch on, artificial intelligence. I suspect that AI was the talk of this event.

What did you hear? Yeah. Everybody's talking about AI all over the world.

But I have to say the conversation in Hong Kong felt a little different from the discussions I have the opportunity to participate in New York City in a couple meaningful ways. First, the overall tone was a bit more positive. What do I mean by this?

I think AI in the U.S. is becoming increasingly polarizing and political. Think about some facts. There are approximately 1,200 pieces of local legislation in the U.S. that are making their ways through different stages, anti-AI legislation, some of which has already been approved.

People are, I think at least justifiably so, concerned about the future of work, the future of electricity bills, the future of clean, drinkable water related to AI. The conversation in Hong Kong was a little different. It wasn't as political.

I think by and large, I picked up a glass half full kind of approach and understanding. People are less focused, for instance, on displacement of jobs, more on enhancement and opportunity, some differences. The other gap, I would say, between New York City and Hong Kong had to do with software versus hardware.

I think the discussion here in New York City is mostly about software. We're all talking about JGPT or Claude or Gemini, and these are the players that are investing and developing tools. Of course, it has a hardware component, but what I mean is in Asia, AI is software, but it's a lot of hardware too, self-driving cars, robotic arms.

I even had the opportunity to drink a cappuccino with latte art made 100% by a robot. This is happening, and you can feel and see and touch how AI is being built into the physical world, I think at a faster pace than what we experience here in the quote-unquote West. An impactful concentration of thought leadership, exchanging views and ideas.

Very curious to wrap us up here, Alejo. How did this trip reshape your investment outlook or your views? By and large, Dan, I think the mere fact that you travel out there, you land at those airports, you take those transfers from the airport to the cities in Asia, you see the urban infrastructure, the energy, the drive, that simply helps remind folks that if you're building an investment portfolio for the future, of course, it's going to be anchored in US assets, but you got to contemplate a world out there in which Asia plays a central role, right?

And so I think it's simply refreshing to see it with your own eyes and recognize that there's a lot of very interesting stuff happening out there, and investment portfolios should at least partially reflect this reality with allocations across mostly, primarily equities in park fixed income and other asset classes in the Asia-Pacific region. Well, these conference takeaway discussions, always fascinating to hear directly from those who are boots on the ground. So thank you again, Alejo, for dropping by Top of the Morning to share your experience with our clients and listeners today.

Anytime. That was fun. Thank you.

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