“Australia has a very large commodity exposure through energy, bulks, base metals and chemical metals, and it’s a market that global funds like and understand – it’s a stable and deep market.”
UBS, which facilitates the most trades of any broker in Australia, argues the influx of investors into the commodity sector forms part of a wider defensive shift.
“We’ve seen investors tilt very much towards cyclical stocks, and not just commodities, but also industrial cyclicals,” Mr Wong said.
“When you’ve got expectations of rising interest rates, there’s more interest in companies that are valued on a discounted cash flow basis, such as the defensive infrastructure stocks, while those extraordinarily high growth tech stocks are obviously less in favour.”
UBS has observed dips in trading volume this year when global uncertainty has spiked, but Mr Wong said that overall, 2022 is on par with previous periods.
On Wall Street, brokers Goldman Sachs, Morgan Stanley and Citigroup all smashed expectations for stock and bond-trading revenue in the first quarter when they reported their earnings on Thursday (Friday AEST).
UBS extended its lead at the top of Australian equity trading, accounting for 19.2 per cent of market share in the secondary market for the first quarter, according to Iress.
CommSec parent Commonwealth Bank has dropped off in line with normalisation in the activity of retail investors.
“All the retail trading platforms went absolutely berserk around halfway through 2020 to mid-way through 2021 because of the stimulus and the performance of the market which drew in retail investors,” Mr Wong said.
“When the market was just going up and up, you can be less judicious with your investment decisions and still make pretty reasonable returns, but as soon as things get hard, retail investors tend to pull back a bit.”
UBS’ growing market share comes despite the broker suffering a string of key departures to rival firms including Barrenjoey Capital and Jarden in the investment banking shakeup of 2021.
Mr Wong, who was promoted to co-head of the bank’s equity business last year, said advancing its lead has been a result of increased investment in its Australian platforms.
Global investors flood into Australia’s commodity producers & More Australia Latest News Update
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