UBS, Morgan Stanley, Other Foreign Investors Are Upbeat on China’s Stock Market Amid Rally
(Yicai) May 13 — UBS Group, Morgan Stanley, and other foreign financial institutions have remained positive on Chinese stocks after the mainland market showed unexpected resilience since the start of the year, despite the Middle East war and the repeated disruptions to market sentiment caused by global trade and tariff games.
The Chinese market is gradually entering a stage driven by both “profit recovery and liquidity improvement,” according to the latest strategy outlooks of several foreign financial institutions. New economic mainlines, including artificial intelligence, new energy, and high-end manufacturing, are reshaping the global capital’s reasoning towards Chinese assets.
The Chinese mainland stock market has continued to strengthen this month, with the Shanghai Composite Index exceeding 4,200 points and hitting an 11-year high. In addition, China’s economy grew by 5 percent in the first quarter from a year ago, beating expectations, while the Chinese yuan exchange rate has remained generally stable.
The structure of the Chinese economy itself determines that it is less sensitive to energy price shocks, said Meng Lei, China equity strategist at UBS Securities. Especially in power generation, the country’s reliance on oil and gas is only about 3 percent, far lower than the global average of nearly 20 percent, she noted.
Coal and new energy remain China’s main power supply sources, giving it a stronger buffering capacity in the context of significant fluctuations in oil prices, Meng pointed out.
“We are not saying that China is not affected. The country remains the world’s largest oil importer,” Meng stressed. “But from the perspective of relative comparison, the Chinese economy is not highly sensitive to fluctuations in oil and gas prices.”
The stability of China’s macro policies is also regarded as an important support by foreign investors. The country’s inflation level is generally moderate, its monetary policy still has some room for adjustment, and its fiscal policy continues to exert efforts.
Fang Dongming, head of China at UBS’s global financial markets department, said that during his roadshows in North America and Europe this year, he clearly felt the rising interest of global sovereign, pension, hedge, and other long-term funds in the Chinese market.
“Against the backdrop of increasing global uncertainties, the risk-resistance capacity and low correlation advantages of Chinese assets have drawn growing attention,” Fang said. “Many institutional investors even regard Chinese assets as a safe haven among global risk assets.”
The focus of foreign institutions on the Chinese market has clearly shifted from the “China recovery trade” to AI and the upgrading of the tech industry this year. According to a new report released by Morgan Stanley, China’s AI industry is moving from a stage of “catching up with technology” to one of “realizing commercial value”.
China’s semiconductor self-sufficiency will likely rise to 86 percent in 2030 from 41 percent last year, further reducing AI deployment costs and enhancing the supply chain resilience, the report said. AI is likely to raise the country’s total factor productivity by about 3 percentage points over the next decade and boost its gross domestic product by about 3.5 points by 2035 compared to a scenario without using AI.
Editor: Martin Kadiev
