UBS tells clients to consider Asia and Europe as stocks hit new highs

Investing.com -- UBS said in a note Tuesday that investors should broaden their exposure to international equities as U.S. markets continue their upward streak and valuations begin to look stretched.

In a note to clients, UBS highlighted that “US equities made multiple new highs over the past week” with the S&P 500 advancing for six consecutive trading days. 

While sentiment has been boosted by trade optimism and resilient second-quarter earnings, the firm cautioned that “with a lot of good news already priced in… markets may be vulnerable to volatility in the near term.”

UBS believes investors should “not overlook opportunities in Asia and Europe to enhance portfolio diversification.”

In Asia, the bank expects China’s technology sector to outperform, citing “rapid development of the country’s AI ecosystem” and growing adoption of generative AI tools. 

“With attractive valuations and earnings growth estimated at 25% and above for this year and next, we remain constructive on China’s tech sector,” UBS wrote. They added that investors “should continue to build long-term positions,” in the sector.

The firm also pointed to India and select ASEAN markets, including Singapore, Malaysia, and the Philippines, as promising. 

UBS said Indian equities should benefit from “double-digit earnings growth over the next two years,” while Singapore offers “one of the best combinations of yield, currency strength, and potential inflows across the region.”

In Europe, UBS sees value in “quality stocks—those with high profitability, stable earnings, and robust balance sheets.” 

The firm also views Swiss dividend-paying stocks as appealing, given that their yields exceed Swiss franc bond yields.

“Under-allocated investors can consider opportunities in Asia and Europe as they increase equity exposure amid near-term volatility,” UBS concluded.