China Equities: Four views for the Year of the Pig

China equity investing in the Year of the Pig. What's the outlook for China's economy and stock markets in 2019?

05 Feb 2019

After the Year of the Dog in 2018, February 5th will usher in the Year of the Pig for 2019.

And Chinese tradition says that's a good thing. After all, in China pigs are associated with wealth and happiness and that's a welcome change from the headline-hogging trade tensions and stock slumps of 2018.

As we look into 2019, we caught up with Bin Shi, Head of China Equities, at the recent Greater China Conference in Shanghai and he outlined his views on what to expect in China's equity markets during 2019.

1. 2018 was a challenging year, what's your view on 2019?

In 2018, US-China trade tensions and the Chinese government's deleveraging policy impacted the economy and markets, so performance came in below expectations.

Looking ahead, we see better prospects in 2019 because we believe that China and the US will resolve their trade issues and that the government will ease back on their deleveraging policies and deliver support for the economy.

Because investor sentiment suffered in 2018, many high quality companies saw their valuations come down significantly, so we think there is room for good quality companies to perform in 2019.

2. In Q4 2018 you said you would increase your allocations, do you still plan to do the same in 2019?

We have been putting more cash to work because we believe valuations for many high-quality companies look attractive.

Furthermore, we believe the policy support measures announced by the Chinese government will begin to positively impact the economy and the market later on in 2019, so we believe we have to be positioned now.

3. What do you think will be the main driver for the Chinese economy going forward?

China's 'demographic dividend' and low land prices have been major contributors to China's past growth.

Looking forward, these factors will still be big drivers but the key factor driving China in the future will be further reforms to release the potential of Chinese companies.

4. What advice can you give equity investors about market prospects for 2019?

Investor sentiment deteriorated in H2 2018 but that's an opportunity for disciplined investors because it means cheaper valuations for good quality companies.

And don't forget that, despite market volatility, fundamental growth drivers, like consumer demand and urbanization, still have a long way to run.

Take urbanization for example. If you are in a modern city like Shanghai, you'd probably think that the process has run its course, but if you went to other areas in China you'd find there is still room for urbanization to grow.

So I'd remind investors not to pay too much attention to headline GDP numbers. Doing that means you may miss out on the fundamental and long-lasting structural changes happening in China's economy and society that are creating attractive investment opportunities, particularly in new economy sectors.

5 facts about Chinese New Year:

  • Moon cycles decide the Chinese calendar and New Year is celebrated on the second new moon after the winter solstice.
  • Since moon cycles vary, the date of Chinese New Year changes from year-to-year. This year it is on February 5th, in 2018 it was on February 16th.
  • Chinese New Year is not just specific to China, it is also celebrated in Taiwan, Thailand, Vietnam, Singapore, Hong Kong, Malaysia, Indonesia, and many other locations around the world.
  • Every year has a different animal according to the twelve signs of the Chinese zodiac. 2018 was the Year of the Dog and 2019 is the Year of the Pig.
  • Since there's a week-long holiday in China, millions of people are off work and an estimated 400 million people will be travelling.

Read more


Equity investments from a global player

UBS Asset Management in the United States

The website contains general information about UBS Asset Management (Americas), Inc., UBS Hedge Fund Solutions LLC, and UBS O'Connor LLC, collectively known as "UBS Asset Management". The information contained on this website does not constitute investment advice or a recommendation to purchase or sell any securities or other financial instrument or any particular strategy or fund. Market commentary, product information and related performance data available on this website has been compiled from sources believed to be reliable and is provided in good faith for informational purposes only. UBS Asset Management does not guarantee the accuracy, suitability or completeness of information contained on this website, and all such information, including but not limited to performance data and related metrics, is subject to change without notice. Certain content on this website is intended for institutional investors and their financial representatives only, and should not be relied upon by retail investors or members of the general public.

Market commentary and similar statements contained herein are based on current expectations and may be considered “forward-looking statements.” Actual future results, however, may prove to be different from expectations. The opinions expressed are a reflection of UBS Asset Management’s best judgment at the time of posting, and any obligation to update or alter any forward-looking statement as a result of new information, future events, or otherwise is disclaimed.

Investments involve risks, are not guaranteed and may not return the original principal amount invested. Past performance is no guarantee of future results. Investors should read all available product information carefully before making an investment decision, including information about applicable risks, fees and expenses. This website does not address the investment objectives, risk tolerance or financial needs of any particular investor. In addition, any statements regarding investment performance expectations, risk and/or return targets do not constitute a representation or warranty that such expectations or targets will be achieved.

This website is not intended for persons located in any jurisdiction where the availability of this website is prohibited or contrary to local law or regulation or would subject any UBS entity to any registration or licensing requirement in any such jurisdiction.

Please confirm you are a US resident to proceed.

Please select at least 1 checkbox