Avoid listed wealth giants: UBS

UBS has listed which stocks to jump on and which to avoid in the event COVID-19 pushes Australia deep into a recession, with two listed wealth giants in its negative column.

Analysts from global wealth giant UBS' Australian equities teams have called out AMP and IOOF as two stocks investors should avoid amid the current turmoil engulfing financial markets across the globe.

Laying out how Australian equities can help investors through the current period of market volatility, UBS's analysts said big four bank ANZ was likely to prove a positive purchase given it could be used as an alternative source of yield thanks to its cheap valuation.

However the firm wasn't so kind to the two listed wealth management giants, commenting that if they underperformed, both AMP and IOOF would suffer fund outflows which would hit their bottom line.

"The recent equity market sell off reduces wealth management income for AMP and IOOF holdings, with net fund flows likely to be reduced due to market volatility," UBS said.

"Our analysts estimate a 10% fall in equities could see a 9.6% profit before tax impact for AMP and 16.5% profit before tax impact for IFL [IOOF].

"AMP's net interest margins could also come under pressure in a low interest rate environment."

After recent sell-offs, UBS said it liked "income names" with offensive dividend income streams, including Aurizon and ANZ, which it noted was trading below 0.9x dated book value for the first time in 27 years.

With sales at supermarkets spiking as a result of the crisis, UBS said Woolworths was also on its good side.

"Sales in supermarkets have spiked materially, with channel checks suggesting sales up more than 25% year on year across stores in recent weeks," UBS said.

"This has three broad implications for supermarket earnings. Stronger top-line sales, stronger gross margins and higher costs.

"We prefer Woolworths given management quality, lower relative valuation compared to the GFC period and potential for capital management."

Read more: UBSAMPIOOFANZWoolworthsAurizonGFCListed equities
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