S-E Asia's strong growth potential holds UBS' interest

Bank focusing not just on China, but also fast-growing markets like S'pore, says CEO


THE China fever that has hit virtually every major bank is not causing Swiss banking giant UBS' keen interest in South-east Asia to cool.

That is because in the eyes of the world's largest wealth manager, Asia is not just China. This is according to UBS group chief executive officer (CEO) Peter Wuffli, who masterminded the bank's aggressive charge into key Asian markets more than five years ago.

'Yes, China is important and fast-growing...but there is also a lot of growth potential in South-east Asia that tends to be neglected by firms that may be concentrating more on North Asia. And there are Japan and Australia too - Asia is not just China,' emphasised the soft-spoken banker.

In an exclusive interview with The Straits Times last Friday, Mr Wuffli said that South-east Asia has been - and continues to be - a great source of growth opportunities, as wealth management and investment banking booms in 'fast-growing markets' like Singapore, Malaysia, Indonesia and Thailand.

'Wealth management, especially for ultra-high net worth clients, is growing particularly fast in South-east Asia,' noted Mr Wuffli. This refers to clients with investible assets exceeding $50 million Swiss francs (S$62.6 million).

Meanwhile, South-east Asian corporates, especially those from Singapore and Malaysia, have strong balance sheets and are actively looking for growth opportunities abroad. What's more, Indonesia and Malaysia are benefiting from strong demand for commodities.

'There are a lot of entrepreneurial families whose companies are growing and heading for initial public offers (IPOs). This opens up possibilities for them to invest the IPO proceeds,' explained Mr Wuffli.

Indeed, the US$917 million (S$1.39 billion) pool of investment banking revenues in South-east Asia, which has surged at a compounded annual rate of 25 per cent since 2002 according to research house Dealogic, is not to be sniffed at.

UBS has 'always been very active out of Singapore for South-east Asia business, which is why we have a very good market share in this region', said Mr Wuffli.

UBS uses Hong Kong as a base for growing its business in mainland China, while Singapore is its investment banking hub for South-east Asia.

'We are committed to both Hong Kong and Singapore. We love both equally and very much,' quipped Mr Wuffli.

Singapore also has other 'distinct and important roles', he added.

'It is the second private wealth management booking centre after Switzerland; a regional investment management centre for Asia ex-Japan; an IT service centre; and our main education and development hub in the Asia-Pacific,' said Mr Wuffli.

Little wonder, then, that UBS 'has not moved a single investment banker into North Asia out of Singapore'.

In contrast, after the Asian financial crisis, other global banks reportedly moved staff from Singapore and South-east Asia to China and other booming North Asian markets.

'We're one of the very few firms that did not downsize their presence in South-east Asia and the rest of Asia during the crisis, which demonstrates our commitment to the region even during a downturn,' said Mr Wuffli.

And now, with the Asia-Pacific providing the 'growth engine' for UBS' global business, the Zurich-based bank is actually moving more top management to Asia.

In February, the bank moved Mr Carlo Grigioni, the vice-chairman of global wealth management, to Singapore. This relocation reflects UBS' 'general philosophy - where there are large growing markets, there will be a higher propensity to locate top management there', he said.

'More senior management will be based in the region, but there is no systematic plan or formula for this - it will be done according to business needs,' added Mr Wuffli.

With so much private wealth and human talent being created in this region, 'Asia is a top priority of every CEO of every major company'.

At the same time, the diversity of Asia 'creates very special management challenges'.

'Every market is different, with varying degrees of financial maturity. We need to remain flexible in how we pursue our growth,' he noted. For instance, UBS has chosen to go the acquisition route in India, while using joint ventures in China.

For all the bank's assertions that its map of Asia is not dominated by the Middle Kingdom, UBS has made sure that it has always been a trailblazer in penetrating the China market, alongside its push into South- east Asia.

UBS made the headlines as the first foreign firm to buy a stake in local brokerage Beijing Securities, and also secured a foothold in asset management through UBS SDIC Funds Management.

It is thanks partly to UBS' recent strong pipeline of deals in China that the Asia-Pacific now makes up about 15 per cent of its global activities, which excludes Swiss banking operations, compared with 8 per cent five years ago.

But looking ahead, the higher level of volatility of Asian markets will be something to watch out for, added Mr Wuffli.

'For four years now, we've had a very good run globally; it was to be expected that there would be greater volatility at some stage.'

But he remains optimistic: 'We do not see the US sliding into recession, and we still see strong appetite in companies for deals. So conditions for the continuing healthy development of our businesses globally and in South-east Asia remain intact,' he said.

'We are not about managing the cycle...we are not about making specific cycle bets, but we make sure we are reasonably resilient against shocks,' he added.

Meanwhile, the focus of UBS' increasingly sophisticated Asian clients is also directed more towards judicious long-term investments in a volatile market, added Ms Christine Ong, the head of UBS Singapore.

That explains why UBS enjoyed 'steady growth in wealth management even during the last two down-cycles', she said.

Turning to the battle for the best private bankers, Mr Wuffli said that UBS was going into training its own advisers and grooming fresh talent from outside the private banking sector.

'A larger proportion of our new talent pool will come from talent creation rather than talent acquisition,' he said.