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UBS Financial Services highlights Argentina's significant economic turnaround, marked by the elimination of a fiscal deficit exceeding 4% of GDP within a year. This has led to a sharp decline in country risk, with US dollar sovereign bonds doubling in price and local stocks surging by 120% in 2024.Key developments anticipated over the next year include a rebound in growth, a potential new agreement with the IMF for additional funds, and midterm elections that may strengthen President Javier Milei’s party. However, challenges such as necessary structural reforms and global financial conditions remain critical factors for Argentina's economic stability.
UBS Financial Services highlights Argentina's economic turnaround, noting the elimination of a budget deficit exceeding 4% of GDP within a year, which has reduced country risk and boosted the value of government bonds and local equities. Key factors influencing the economy include anticipated growth recovery, a new IMF agreement for additional funding, and upcoming mid-term elections that may strengthen President Javier Milei's party. However, concerns about the sustainability of Milei's influence and necessary structural reforms persist, alongside risks from global financial factors and domestic political dynamics.
UBS has a positive outlook for Greek bonds, citing fiscal resilience and a shortage of titles as key factors. The bank forecasts a 2.8% GDP growth for Greece in 2025, driven by Recovery and Resilience Facility disbursements, and anticipates a primary fiscal surplus of 2.5% of GDP. While Moody’s maintains a Ba1 rating, an upgrade to investment grade is expected in late 2024.
UBS has revised its UK GDP growth forecasts downwards for 2024 and 2025, now predicting 0.8% and 1.1% respectively, due to a smaller-than-expected economic expansion in November and a downward revision of Q3 GDP. The industrial sector continues to hinder growth, while businesses remain cautious amid recent tax increases. Despite a slight GDP rise in November, the outlook suggests a potential contraction in Q4-24, with a temporary recovery anticipated in early 2025 driven by fiscal spending.
UBS anticipates a muted response from investors to India's FY26 Union Budget, particularly if capital expenditure remains at Rs 11 trillion, similar to FY25. This could negatively affect infrastructure sectors like Larsen & Toubro, which rely heavily on domestic orders amid limited overseas opportunities. While private capex sectors may show resilience, fiscal constraints could hinder ambitious growth measures, with non-tax revenues expected to decline.
UBS Group AG advises investors to short India's rupee and reduce exposure to the country's stocks, citing a structural economic slowdown. This downturn, attributed to long-term declines in credit growth, foreign direct investment, export competitiveness, and earnings potential, is expected to worsen following Donald Trump's presidency.
The Brics nations—Brazil, Russia, India, China, and South Africa—are emerging as key players in global growth, with expectations of outpacing advanced economies by 2025. Despite individual challenges, particularly for Brazil, their collective potential is bolstered by prudent fiscal management and above-average growth rates, contrasting sharply with high debt burdens in developed nations. However, the cohesion of the Brics remains in question, as divergent interests among members could hinder their effectiveness as a unified bloc.
The Hang Seng index is attempting to rebound after a 6% drop at the start of the year, influenced by uncertainty in the Chinese economy. Key economic data on retail sales and industrial production will be crucial for its recovery, with a breach of the 20,000-point threshold signaling a potential bullish reversal towards 23,000 points. However, the outlook remains bearish until these levels are surpassed, amid ongoing macroeconomic challenges.
UBS Group AG is navigating uncertainty regarding potential higher capital requirements from the Swiss government, which could impact its share buyback plans. Despite this, the bank is on track to exceed its targets for integrating Credit Suisse and returning capital to investors, with a projected payout of over $7.3 billion in buybacks and dividends by 2026. UBS emphasizes the importance of enhancing regulatory oversight rather than solely focusing on equity capital, as it seeks to simplify its structure and address concerns about its size and stability.
China's secondary housing market is increasingly becoming a key driver in the real estate sector, with second-hand home sales expected to rise this year. While new home sales may continue to decline, the proportion of pre-owned homes in transactions has surged, particularly in major cities, reflecting a shift in buyer preferences due to falling prices and market conditions.
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