The Chief Investment Office (CIO) of UBS Global Wealth Management stated in an institutional viewpoint released today (Jan. 22) that multiple factors continue to benefit the Chinese market. Given geopolitical uncertainties, the recent rally in Chinese equities has paused, but we believe policy tailwinds and structural growth drivers should support a market recovery. Within global equities, we remain positive on China, particularly the technology sector.
UBS pointed out that U.S. President Donald Trump's threat of new tariffs over the Greenland issue has weighed on investor sentiment, dragging down Chinese equities earlier this week. At the same time, the Chinese government has intensified its regulation of the domestic stock market amid record-high trading volumes. The MSCI China Index fell 1% on Monday, partially erasing its gains for the year.
However, within global portfolios, we remain positive on Chinese equities, especially the technology sector, UBS stated. The firm believes that targeted policy support, ongoing technological innovation, and global investors' diversification needs should support further market gains.
According to its analysis, policy support focusing on innovation and consumption should sustain growth momentum. The 5% economic growth target for 2025 remains aligned with the Chinese government's objectives, and trade data continue to show resilience in China's exports. Targeted fiscal and monetary policy support should help the government achieve its GDP growth target of 4.5–5% for 2026. The Chinese government's commitment to high-quality economic growth, structural reforms, and technological self-sufficiency should also provide a favorable backdrop for Chinese equities.
Meanwhile, new catalysts in artificial intelligence (AI) innovation are expected to drive further stock market gains. UBS emphasized that AI innovation remains a primary driver for Chinese equities, and the Chinese government's clear support for advancing domestic AI model development and chip manufacturing has strengthened the firm's confidence in the technology sector.
Looking ahead, DeepSeek is likely to launch a new model in February, which could reignite investor interest in structural growth themes. Meanwhile, fourth-quarter earnings should further validate corporate investments in areas such as AI, cloud infrastructure, and digital applications. This should support our view that Chinese tech stocks remain the most attractive.
UBS also noted that a resurgence of global investor interest could further support equity gains. Last week, the Chinese government tightened regulations on margin trading in domestic exchanges, while heavy selling in A-share ETFs indicated the government's efforts to curb overly optimistic sentiment. However, the impact on overall market liquidity is limited, and southbound capital flows (mainland investors buying Hong Kong-listed stocks) are expected to continue. More importantly, as confidence in China's technological innovation grows, global investor interest in Chinese equities may rebound in the coming months. After three consecutive years of strong gains in U.S. stocks, investors' demand for diversification is also rising, which should create further upside potential for Chinese equities.
UBS reiterated its "attractive" rating on Chinese equities, citing their attractive valuations, particularly favoring leading technology platforms with strong AI monetization capabilities, cloud computing advantages, and international expansion plans. The firm also sees earnings and growth opportunities in the financial and healthcare sectors, as well as industries benefiting from anti-involution measures and the green transition, such as leading basic metals and power equipment companies.
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