Chinese stock investors are being advised by UBS Global Wealth Management to adopt a defensive strategy due to weak consumption and potential market volatility caused by potential tariff increases from the incoming Trump administration.

Eva Lee, head of Greater China equities, suggests focusing on stocks with dividend yields exceeding 6%, particularly in sectors such as banks, utilities, and energy, as they offer a significant yield gap compared to government bonds.

Chinese stocks have had a negative start to 2025, with the CSI 300 Index experiencing a 2.9% decline, the worst start to a year in almost a decade. Despite previous stimulus measures, traders remain cautious about economic uncertainties as President-elect Trump's inauguration approaches.

To address these challenges, the Chinese government plans to issue more ultra-long special treasury bonds in 2025 to support trade-in programs for consumer products and major projects. Additionally, the country's bond yields are declining, with the 10-year government bond yield falling below 1.6% for the first time, reflecting growing economic concerns and expectations for further monetary easing.