Chinese stocks set for high single-digit returns by end-2024- UBS

Investing.com-- UBS analysts said they expected Chinese stocks to offer high-single-digit returns by end-2024, citing improved prospects for an earnings recovery and expectations of more support for the property market. 

Specifically, the brokerage expects the MSCI China index- which is a mix of Chinese bluechips, Hong Kong, and other sectors- to offer said returns. The index is currently trading up about 4.5% so far this year. 

UBS said traders should recommend a “barbell approach” to China, with positioning in defensives and growth sectors. The brokerage recently upgraded China to its “Most Preferred” within its Asia strategy, and sees stronger returns from the country than Asia excluding Japan. 

In the near-term, UBS recommended adding exposure to Chinese growth stocks, and to increase defensive exposure in the medium-to-long-term, stating that investors should position for a “slowing growth environment” in the country. 

The brokerage said it favors stocks in the auto, consumer, healthcare, technology and online gaming sectors. 

Notable stocks recommended by UBS include Alibaba Group Holdings (NYSE:BABA), China Communications Construction (SS:601800), JD.com Inc (NASDAQ:JD), NetEase Inc (NASDAQ:NTES), and Tencent Holdings Ltd (HK:0700).

While the MSCI China index reflected some strength in Chinese stocks, the country’s benchmark Shanghai Shenzhen CSI 300 and Shanghai Composite indexes were both nursing steep losses in recent sessions, and were both trading close to six-month lows. 

Some foreign buying helped ease losses in Hong Kong’s Hang Seng index, although the index had touched a three-month low earlier in August.

Sentiment towards China was battered by a string of weak economic readings from the country over the past two months, while promises of stimulus support from Beijing offered little relief.