UBS , the world's biggest wealth manager, said on Monday it expects growth in its Taiwan client assets to pick up in the second quarter as improved ties with China help boost investor confidence.

The stronger outlook comes as investors gain more appetite for risk amid a recent stock market rally and a proposed cut in the inheritance and gift taxes offset concerns the global economic downturn could deepen, Martine Tseng, an executive director of UBS in Taiwan, told reporters.

She said UBS Taiwan hopes its assets under management will grow in the second quarter by more than the 10 percent growth logged in the first.

People are more optimistic now. Their risk appetite has increased. For one thing, interest rates have gone so low, Tseng said, adding that many clients are now more willing to buy stocks after having avoided such investments since late last year.

Taiwan's stock market jumped about 14 percent in the first quarter, making it the world's second-best performer after Shanghai <.SSEC>.

Our business momentum is still very solid. We're very optimistic about Q2 and we hope it will outgrow Q1, Tseng said.

Having said that, most of our clients remained cautious. Some 70-80 percent of their assets were allocated in low-return, low-risk investment products, with the rest in currency, gold and bronze investments.

Taiwan -- Asia's No. 3 wealth management market after Japan and China -- has been a key market for global players, including the Swiss bank and JPMorgan's asset management arm.

UBS, one of Europe's hardest-hit lenders in the global financial crisis, had previously said its Taiwan assets would grow more than 20 percent in 2009, topping 2008 but well below the 50 percent growth achieved in 2007.

Shares of UBS surged 9.5 percent in New York trading on Thursday, beating the Dow Jones Industrial Average's <.DJI> 3.14 percent advance.

($1=T$33.7)

(Reporting by Faith Hung; Editing by Ken Wills)

Investment China