UBS fund exposed to First Brands bankruptcy

Good morning and welcome back to FirstFT Asia. In today’s newsletter:

• First Brands fallout threatens largest Swiss bank

• How the UK’s China spying case collapsed

• How much are China’s Golden Week travellers spending?

A UBS fund has 30 per cent of its portfolio tied to the failed First Brands Group, leaving Switzerland’s largest bank grappling with a bankruptcy that has convulsed global finance.

What to know: Clients are braced for big losses after UBS O’Connor, a private credit and commodities specialist owned by the Swiss bank, revealed that 30 per cent of the exposure in one its funds is tied to the auto parts group.

O’Connor recently told investors in its “Opportunistic” working capital finance strategy that the fund has 9.1 per cent of “direct” exposure — financing facilities based on invoices First Brands’ was due to pay — and 21.4 per cent of “indirect” exposure — based on invoices its customers were due to pay. Overall, UBS has more than $500mn of exposure to First Brands’ debt and invoice-linked financing, according to bankruptcy filings.

Private credit concerns: UBS is just one of many investors to be hurt by the implosion of the Ohio-based industrial business, which has raised broader questions about the dangers lurking in the booming private credit market. The fallout over First Brands threatens to engulf the highest echelons of Swiss banking in a fresh crisis relating to invoice finance, nearly five years after the implosion of Greensill Capital rocked Credit Suisse. Read the full story.

Here’s what else we’re keeping tabs on today:

• Economic data: Taiwan releases September inflation data.

• UK-India relations: British Prime Minister Sir Keir Starmer begins a two-day trip to India, where he will meet Narendra Modi on Thursday.

• Monetary policy: Thailand’s central bank announces its rate decision.

Five more top stories

1. The Crown Prosecution Service has said that a case involving alleged Chinese espionage in parliament collapsed after the government refused to provide evidence that China was a threat to the UK’s national security. The CPS said it repeatedly asked the government to provide evidence that China was a threat to national security at the time of the alleged offences in 2023, but was rebuffed.

2. OpenAI has signed about $1tn in deals this year for computing power to run its artificial intelligence models, commitments that dwarf its revenue and raise questions about how it can fund them. The deals also involve circular arrangements between the world’s most valuable start-up and its partners, adding to concerns about a bubble in AI.

• How we use AI: An FT review of usage data shows the ways millions of people have integrated the technology into their everyday lives.

• The AI Shift: John Burn-Murdoch and Sarah O’Connor explore how AI is transforming the world of work in our new weekly newsletter. Sign up here.

3. Tesla has introduced a more affordable and stripped-down version of its flagship Model Y car as Elon Musk’s group braces for slowing US demand following the expiry of electric vehicle federal tax credits. The new $37,990 “standard” version is about 15 per cent cheaper than the previous base offering, and has a driving range that is 10 per cent less than the premium version.

• More auto news: BMW cut its full-year profit guidance after sales in China came in “below expectations”, highlighting the struggle of premium European carmakers to hold their own against Chinese competitors.

4. President Donald Trump hinted at a breakthrough in trade tensions with Canada at a meeting with Prime Minister Mark Carney but stopped short of offering any firm commitments to the US’s northern neighbour. The two men met at the White House in an effort to rescue a $1.3tn trading relationship that is threatened by a raft of US tariffs. Here’s more from Washington.

5. State Street’s flagship S&P 500 exchange traded fund is on track to post the largest annual outflows of any such fund in history, underscoring the changes sweeping through an ETF industry gripped by cut-throat competition for cost-conscious investors. Investors have pulled $32.7bn from SPY so far this year, even with the S&P 500 soaring 15 per cent in 2025.

News in-depth

As China’s eight-day Golden Week holiday draws to a close, one question will be preying on the minds of policymakers in Beijing: how much are travellers spending? The government has tried to boost domestic spending against a backdrop of deflation and trade tensions with the US. But in tourism hotspots across the country this week, there were few signs of a spending splurge.

We’re also reading . . . 

• Saudi slowdown: Foreign consultancies in the kingdom are reining in a years-long boom in hiring, recruiters and analysts say, as Riyadh reviews its priorities.

• Israel-Hamas war: Some in Israel want Hamas footage of hostages censored. Evyatar David’s family wants the world to see his suffering.

• H-1B visas: Businesses that relocate specialist tech workers from countries such as India have reported a marked increase in interest from clients looking to move to places other than the US.

Chart of the day

Investors are snapping up assets across the developing world as a sliding dollar and bargain valuations fuel the biggest rally in emerging market stocks in more than 15 years.

Take a break from the news . . . 

Cai Guo-Qiang, famous for his mesmerising pieces using fireworks, knows how to make a scene. For his next trick, coinciding with this month’s Art Basel in Paris, the Chinese artist will set the Centre Pompidou alight, ahead of a big refurbishment of the gallery.