UBS Wealth Management: Upcoming Earnings May Drive a Rerating of China’s Large Internet Companies
The Office of the Chief Investment Officer at UBS Wealth Management said opportunities in China are becoming broader and more balanced. Semiconductor equipment remains its preferred area within technology, while upcoming second-quarter earnings could provide a catalyst for a rerating of large internet companies. Sector rotation in Asian markets is becoming increasingly pronounced, the institution said. Previously lagging markets, including the MSCI China Index, have significantly outperformed other East Asian markets, and that broadening trend is expected to continue. Earnings across industries are gradually stabilizing, while the structural growth thesis for artificial intelligence remains intact. China’s localization drive and demand from domestic hyperscale cloud providers continue to support the country’s local hardware supply chain. Upcoming earnings reports could provide clearer signals for China’s internet sector, including whether cloud-business growth is accelerating, how AI monetization is progressing and how profit margins in core businesses are trending. Continued share buybacks, potential AI-asset spin-offs and a more stable regulatory environment should also support a rerating of the internet sector, UBS Wealth Management said. Outside technology, the institution also favors the power and health-care sectors. Amid market volatility, banks, insurers, selected utilities and consumer-staples companies offer defensive cash flows and income.
Sector rotation in Asian markets is becoming increasingly pronounced, the institution said. Previously lagging markets, including the MSCI China Index, have significantly outperformed other East Asian markets, and that broadening trend is expected to continue.
Earnings across industries are gradually stabilizing, while the structural growth thesis for artificial intelligence remains intact. China’s localization drive and demand from domestic hyperscale cloud providers continue to support the country’s local hardware supply chain.
Upcoming earnings reports could provide clearer signals for China’s internet sector, including whether cloud-business growth is accelerating, how AI monetization is progressing and how profit margins in core businesses are trending.
Continued share buybacks, potential AI-asset spin-offs and a more stable regulatory environment should also support a rerating of the internet sector, UBS Wealth Management said.
Outside technology, the institution also favors the power and health-care sectors. Amid market volatility, banks, insurers, selected utilities and consumer-staples companies offer defensive cash flows and income.