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2026-10-28 13:58:06 UBS published a China equity strategy report stating that after the recent tech stock-led correction, China's major indices have cumulatively fallen 18% YTD, while the AI-related tech hardware stocks tracked by the bank have risen only 9% YTD. The bank believes concerns over AI fundamentals have been overly amplified, with valuations now approaching historical lows and risk-reward profiles becoming attractive again. Investor attention may rebound as portfolios are rebalanced for the new year toward year-end. The bank noted that earnings growth for tech hardware companies remains strong, with earnings forecasts for most AI tech stocks revised up by 12% to 15% over the past three months. However, valuations are now close to historical trough levels and imply a significant slowdown in future earnings growth. Historically, when valuations reached similar levels, the related stocks gained more than 50% on average over the following 12 months. Crowd positioning and financing data tracked by the bank showed that net positions of "hot money" have retreated to levels seen at the beginning of the year. Hong Kong stock short-selling ratios are also near historical highs, while short-selling activity in certain AI tech hardware stocks has recently increased. On the broader market, MSCI China癒礎s 12-month forward P/E ratio has reached 9.5x, which is 1.2 standard deviations below the historical average. However, Chinese equities remain weaker than other markets in terms of earnings growth and momentum. RMB appreciation will continue to pressure exporters, while higher input costs may also weigh on domestic consumption demand. The bank favors a barbell strategy, with top picks including AI tech hardware stocks such as SMIC (00981.HK), NAURA (002371.SZ) and CXMT (688825.SH), as well as bank stocks. (ad/da)~ AASTOCKS Financial News Website: www.aastocks.com This article was automatically translated by AI, the Chinese version should be considered the authoritative version. AASTOCKS.com Limited does not guarantee its accuracy or completeness and accepts no liability for any damages or losses arising from the use of this translation. | |