UBS has advised investors to adopt a defensive stance in Chinese equities due to uncertainties surrounding stimulus measures and trade relations under a Donald Trump presidency.
The potential for increased volatility and the prospect of higher U.S. tariffs on Chinese imports pose significant risks to Chinese stocks.
The Chinese government is taking a cautious approach to fiscal stimulus, waiting for clarity on the incoming administration's trade policies.
The lack of immediate, targeted fiscal initiatives has left investors feeling underwhelmed and contributed to recent declines in Chinese equity markets.
UBS recommends a bias towards defensive and high-yielding value sectors, particularly those heavy in state-owned enterprises, as they are likely to outperform amid anticipated policy stimulus.
UBS maintains a neutral stance on Chinese equities overall but sees a potential buying opportunity in Chinese internet stocks if prices were to decline sharply.
Investors are advised to remain vigilant and responsive to changes in domestic policy and international trade dynamics.
The interplay between China's fiscal strategies and U.S. trade policies will be critical in shaping the performance of Chinese equities in the near term.