UBS has reworked the composition of its China Global Equity Focus List, adding two internet platform franchises and shifting weightings across a set of large-cap names as it reiterates a positive outlook for Chinese equities amid a wave of AI adoption and policy support.
New entrants to the list include Kuaishou Technology (HK: 1024) and Meituan (HK: 3690). UBS assigned Kuaishou a 3% portfolio weighting, highlighting the companys progress on artificial intelligence. The bank singled out Kuaishous Kling AI model as a global leader in text-to-video generation and said user engagement metrics are comparable to leading generative models. UBS noted investor focus on Kuaishous AI potential may grow even as near-term revenue pressures persist in its e-commerce and advertising businesses.
Meituan received an initial 2% allocation from UBS. The banks assessment is that the fiercest phase of competition in Chinas food-delivery market has subsided, creating scope for a tactical rebound in the stock. UBS expects a more rational competitive environment to support a steadier earnings recovery from the second quarter onward.
Alongside those additions, UBS removed China Merchants Bank, China Mobile (HK) and Jiangsu Hengrui Pharmaceuticals from the focus list. The bank also shifted portfolio weights across existing holdings: Ping An Insurances allocation was increased by 2 percentage points, Alibaba by 1 percentage point, and WuXi AppTec and Xiaomi by 0.5 percentage points each. At the same time, UBS trimmed exposure to China Construction Bank, Midea Group, Yum China, China Pacific Insurance and PICC Property & Casualty.
UBS reiterated that it favors technology stocks on the back of robust AI-driven growth, leadership in innovation and the ongoing localization of semiconductors. The bank identified semiconductors, AI supply-chain companies and major internet platforms as particularly well positioned to capture rising AI monetization and to benefit from potential international capital inflows.
On expected returns, UBS said it foresees mid-teens returns for Chinese equities through June 2027, supported by a combination of improving corporate fundamentals, policy tailwinds and the long-term growth potential tied to artificial intelligence.
Key takeaways:
- UBS added Kuaishou and Meituan to its China focus list and sized positions at 3% and 2% respectively.
- The bank increased weights in Alibaba, Ping An, WuXi AppTec and Xiaomi, while cutting or removing several bank and insurance names.
- UBS expects technology and AI supply-chain companies to benefit most from accelerating AI adoption and international capital flows.