UBS Global Wealth Management has revised its forecast for Chinese equities due to concerns over potential US tariffs and a weak domestic economic response.
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.
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.
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.
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.
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.
The outlook for Chinese equities remains uncertain, with market participants bracing for continued volatility and a cautious investment environment.