UBS joins Goldman, Morgan Stanley in trimming China stocks view

UBS Group joined other banking peers in lowering its forecast for Chinese stocks this year, citing slowing growth momentum in the world’s second-largest economy.

The Swiss banking group revised its year-end target for the MSCI China Index to 72 from 83 set in January, based on a reduced earnings growth forecast of 15 per cent, said James Wang, head of China strategy for UBS Investment Bank Research. The index closed at 61.33 on Wednesday (Jun 28).

“Policy stimulus represents the biggest swing factor for the market in the second half of the year,” Wang wrote in a note. “That said, we believe overall investor expectations are not high.”

In April, Wang was expecting robust earnings growth of 20 per cent in 2023, citing a potential consumption recovery and improving wage growth in China. The MSCI China Index has lost 20 per cent since a January high, worse than the performance of any primary index globally, data compiled by Bloomberg showed.

China is fighting back against mounting investor pessimism. The central bank has stepped in to support the currency for a third time this week, and authorities earlier suspended a prominent finance writer and two of his peers for spreading “negative and harmful information” about the country’s stock market.

UBS joined a list of investment banks that recently reduced their forecast on Chinese stocks. Strategists at Goldman Sachs Group, Nomura Holdings and Morgan Stanley have all slashed their targets on the benchmark over varying periods by at least 11 per cent. BLOOMBERG