UBS remains optimistic about Chinese stocks

 

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UBS remains optimistic about Chinese stock market, expecting improvement in macroeconomic conditions and corporate profits to further boost the market. 

UBS Asian stock strategy continues to be bullish on the Chinese market, with an estimated 14% year-on-year growth in earnings for the MSCI China Index this year, far higher than the predicted 2% growth for the Asia region, the bank said. 

The downward trend in the forecasts of Chinese corporate profits may soon reach its bottom and begin to rise in the second quarter, it said. 

Although valuations have rebounded from the bottom, the current PE ratio remains only 10.1 times, which is 1.1 standard deviations lower than the historical average, indicating there is still room for growth, it said.

Certain sectors are expected to provide higher potential returns, especially the consumer, internet, transportation, industrial capital goods, materials, some pharmaceutical, and medical equipment sectors, which are expected to outperform the broader market in the coming months, the bank said.