UBS AG, the second-biggest manager of money for the wealthy, added overweight ratings on Japanese equities, the U.S. dollar and the Canadian dollar, according to the latest monthly letter from Chief Investment Officer Alexander Friedman.
UBS is recommending Japanese equities while reducing its view on emerging market stocks to neutral, Friedman said in the letter to client advisers dated yesterday. Japanese stocks will probably rise, supported by the Bank of Japan’s plan to boost money supply by purchasing assets equal to about 13 percent of gross domestic product annually, or almost twice the rate of purchases by the U.S. Federal Reserve, he said.
“This is the equivalent of the BOJ turning the tap on full and then calling in the fire trucks to use their hoses as well,” Friedman wrote. “It is no surprise the water is rising.”
Friedman kept his overweight recommendation on U.S. stocks, forecasting that the Fed may start reducing monthly asset purchases by $10 billion per month from around October, leaving the rate of asset purchases at $65 billion by year-end. This will probably not have a “major negative impact on risk assets,” while at the same time could support the U.S. dollar, especially relative to the euro, he wrote.
Instead of adding to UBS’s current euro short, the Zurich-based bank is recommending a dollar position versus the Swiss franc, which is capped against the euro by the Swiss National Bank. UBS is also recommending the Canadian dollar over the Australian dollar. UBS kept its preference for the British pound versus the euro.