Chinese equities have seen a significant surge in recent weeks, reaching two-year highs due to optimism surrounding Beijing's stimulus measures.
However, analysts are starting to express caution as the momentum of this rally appears to be slowing down.
UBS analysts believe that while Chinese equities are not as undervalued as they were a month ago, there is still potential for gains.
UBS analysts recommend an overweight position in local equities, emphasizing that the overall direction of China's stimulus policy is positive.
The Chinese government has announced fiscal measures to support the economy, including increased debt issuance and support for provincial governments.
However, the lack of clarity regarding the timing and scale of these measures has tempered investor sentiment.
The recent rebound in Chinese equities coincides with significant capital outflows from India, suggesting a potential shift in investor sentiment.
The interplay between Chinese and Indian markets highlights the challenges facing emerging economies.
Looking ahead, the outlook for Chinese equities remains cautiously optimistic, with UBS analysts believing that as more details regarding fiscal measures emerge, investor confidence may be bolstered.
It is important for investors to stay informed and vigilant as they navigate this evolving landscape.