ubs cuts china equities forecast amid us tariff concerns and weak stimulus

UBS Global Wealth Management has revised its forecast for Chinese equities due to concerns over potential US tariffs and a weak domestic economic response.

Revised Forecast for Chinese Equities

The firm has adjusted its mid-2025 target for the MSCI China Index from 76 to 67, while also lowering the end-of-2025 target from 79 to 74.

The MSCI China Index, which tracks approximately 700 domestic and foreign stocks, has experienced a decline from a peak of 76 points to 67 points recently.

Shift in Sentiment

This shift in sentiment follows a period of optimism fueled by government measures aimed at stabilizing the economy, but the anticipated recovery has faltered as the stimulus measures have not met investor expectations.

The potential re-election of Donald Trump has intensified concerns about trade relations between the US and China, with his proposed tariffs raising alarms among investors.

Market Dynamics and Investor Stance

The current environment is characterized by tariff-induced volatility, dampening global investor confidence.

The disappointing domestic economic response in China, coupled with geopolitical risks, has led to a significant shift in market dynamics, with many investors adopting a cautious stance.

Insufficient Stimulus Measures

Despite the Chinese government's announcement of a substantial debt repayment package, analysts argue that this initiative is insufficient to stimulate consumption or revitalize the struggling real estate sector.

The lack of substantial, incremental stimulus has led to a decline in investor expectations.

Weakening Real Estate Market

The ongoing weakness in China's real estate market has significantly undermined confidence in the broader economy, leading consumers to adopt a more conservative approach to spending.

Uncertain Outlook

The outlook for Chinese equities remains uncertain, with market participants bracing for continued volatility and a cautious investment environment.

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