Central banks are serving as a key defence against another global financial crisis developing following the shock Brexit vote, UBS economists said yesterday.
Ms Tan Min Lan, head of the Swiss bank's Asia-Pacific investment office, said the momentum in the United States should offset the expected economic downturn in Britain later this year and the slower growth in the euro zone.
"US earnings growth was very weak in the first quarter, but that's the lowest point," added Ms Tan, who was speaking at the bank's CIO Asia Pacific Forum.
"What's not been priced in is an expected 6 per cent earnings growth for the rest of the year."
This is despite looming political risks, including the upcoming US presidential election, although she added that a (Donald) Trump victory by default without a clear mandate is a "low probability event", and the impact on financial markets will not be lasting.
With Brexit making a US interest rate hike this month now unlikely, UBS expects just one rate rise this year - in December. Further delays in raising rates mean net interest margins among the banks are also affected, said UBS, which has a neutral call on Singapore banks.
The investment bank also prefers to be in Asian equities than Asian fixed income.
Mr Kelvin Tay, regional chief investment officer at UBS' wealth management business, told the forum: "Asian equities valuations are still close to recession levels. Our balance sheets are very strong, but our PNL (profit and loss) are hurt because we are exporting less."
He said the direct trade impact on Singapore from Brexit will be minimal. "What's problematic is our exposure to the EU (European Union). A slowdown in the EU economy will hurt us because 15 per cent of our exports go to the EU."
There is also unlikely to be a direct impact on Singapore as a financial hub, as Singapore and London complement each other, he added. It is also unlikely that investment banks based in London would relocate their operations and staff here.
"Investment banks based in London serve the euro zone while investment banks in Singapore cover South-east Asia as a centre. Those who cover China and North Asia often use Hong Kong," said Mr Tay.
One looming issue is that investment banks in Britain will eventually lose the "financial passport" that allows them to operate freely in Europe without being subject to additional European regulation.
That could force banks and capital to jump ship to Europe.
"It's very early days," said Mr Tay. "But most banks have to think of these issues once Article 50 of the EU's Lisbon Treaty is invoked."
He added: "Where will they move to next? Paris, Dublin, Frankfurt or Amsterdam?"