Investors now more willing to overlook China's slowdown, UBS CEO says

Key Points
  • China's cyclical bumps would not derail its economic prospects, UBS CEO Sergio Ermotti said
  • World's second-largest economy can still double its size by growing 5 percent over the next 15 years, according to Ermotti

Compared to a year ago, investors are now more willing to overlook China's economic slowdown, realizing that current cyclical bumps will not derail the country's prospects, UBS CEO Sergio Ermotti told CNBC.

China can still double the size of its economy even if it grows only 5 percent over the next 15 years, he added. That thinking is now "much more embedded" in the way investors see the country and the region, Ermotti noted.

"I do see a little bit more constructive attitude towards taking a risk … Usually you measure appetite of investors by their ability or willingness to take a bit of leverage on their positions. We've seen a little bit of pick up there," he said.

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Even as concerns about a slowdown in the world's second largest economy start to settle, investors are still kept on edge by heightened geopolitical tensions at a time when market valuations are high, according to Ermotti.

North Korea last week claimed it successfully tested an intercontinental ballistic missile.

Policy uncertainties from the Trump administration are also key for investors, even though risks from Europe have subsided somewhat after the French elections, Ermotti said.

"The geopolitical front is quite worrying in respect to what's going on almost every day. Investors are really fundamentally touched by all those dynamics and they need to see a very prolonged and stable pattern going forward," he said.