- Economic activities are bouncing back on strong pent-up demand, as evidenced by retail spending and travels during the Golden Week holiday. However, sales for big-ticket items such as automobiles as well as property purchases are still below expectations as it takes time to restore confidence levels after COVID.
- Markets are expecting more concrete supportive measures from the government, but we think it is more important that measures are clear and can be interpreted and implemented without ambiguity. A firm and consistent direction from the government will do more to restore business sentiment and encourage investment.
- Geopolitical tension between China and the US is a concern, but an economic decoupling is not likely at this stage as the two countries are highly dependent on each other. However, sanctions particularly on semiconductors could have a detrimental downstream impact on technology companies, even if there is no immediate dent on economic growth numbers.
- Strong competitiveness from Chinese corporations is giving us confidence to stay invested for the long term. Not only are they adapting to the various external challenges in this volatile environment, they continue to invest in technology, invest in research and development (R&D), control costs and grow their business.
- Global investors overall have an underweight position in China this year. While most are waiting for a catalyst to possibly return to Chinese equities, valuations are low and any positive development can ignite the market. We continue to focus on industry-leading, high quality companies that we believe will be successful in the long term.
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