UBS Says Investors Should Be Defensive On Chinese Stocks – Media

Editorial Staff

6 January 2025

urges Chinese equity investors to stay defensive because consumption remains weak and upcoming US tariffs will affect the Asian country, according to Bloomberg.

Investors should seek out stocks that “offer decent dividend yields above 6 per cent, compared to 2 per cent government yields,” Eva Lee, head of Greater China equities at the wealth manager, told Bloomberg Television. “There’s a 4 per cent yield gap that I think is very attractive,” she said, recommending sectors including banks, utilities and energy.

As this news service has noted for some time, Chinese equity performance has been under a cloud amid concerns about the indebtedness of some of its banks and real estate sector, the crackdown about three years ago by Beijing on certain fields (private education, forms of technology), an ageing population, and worries about worsening trade relations with the West. Late last year, the government unveiled a package of stimulus measures to try and bolster growth.

For a more broad-reaching assessment of the economic and investment landscape from UBS Global Wealth Management, see here. This news service carried an overview of how wealth managers think about the outlook, here.

From 5 January 2024, the China Shanghai Composite Stock Market Index has risen 12.3 per cent, as of the close on 3 January 2025. The index fell about 2.9 per cent on Friday.

UBS’s Lee said China has shown willingness to provide more fiscal stimulus to offset the impact of tariffs, but investors are concerned about “how quickly and responsively” authorities can act.

In a note on 2 January from UBS Global Wealth Management, it said: "With Donald Trump today reiterating plans to levy new trade tariffs on China and others, it's unsurprising to see Beijing seeking more leverage and ways to exert its counter pressure. We've been flagging US-China regulation and geopolitics as a risk to sentiment in 2025, though we don't think this will overshadow strong earnings growth in key tech sectors.

"Investors should be prepared for heightened headline volatility into the early months of the Trump administration, and consider utilising structured strategies to build up long-term allocation if their quality tech exposure is insufficient," it said.

UBS noted that China's Ministry of Commerce on Thursday added 28 more US entities to its export control list over national security concerns, while it also banned the export of dual-use items to these companies. The targeted companies primarily come from the US defence sector, the bank said. The Chinese ministry is also reportedly mulling tighter export restrictions on tech used to process or manufacture both battery components and industrial metals gallium and lithium.

It added that in the US, the outgoing Commerce Department on Thursday said it is considering new rules that could restrict or ban Chinese drones in the US over national security concerns, with a final decision to be left to the incoming Trump administration.