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<Research>UBS Lists Out Stock Recommendations as Southbound Funds Show Growing Interest in Small Caps, Suggests Buying on Dips w/ Positive Outlook for CN Stocks
Recommend 36 Positive 63 Negative 33 |
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According to a strategy report from UBS on Chinese stocks, the broker has reassessed the investment framework for the Hong Kong stock market as southbound investors have ramped up their allocation to Hong Kong stocks to as high as 21% of Hong Kong's free float market capitalization. UBS has identified the following key factors affecting H-shares (ranked by importance): 1) Policy and regulation; 2) Earnings (especially earnings revision trends); 3) Innovation; 4) Capital flows (particularly southbound investors) and interest rates; 5) Valuation; 6) Macroeconomic conditions; 7) Geopolitics. Potential short-term downward risks have been observed under the updated framework: 1) UBS analysts predicted that consensus earnings forecasts for the HSCEI might be revised down by 4% (particularly due to competition in the food delivery industry); 2) HIBOR has sharply decreased and may slightly rebound; 3) The macroeconomic environment remained lukewarm, with limited short-term stimulus expectations. Nonetheless, UBS kept a positive outlook on H-shares and the overall Chinese stock market. To the broker, attractive valuations (especially for AI-related tech stocks) may lead southbound capital (albeit lower than in 1H25) and potential overseas capital to flow in, so it supported "buying on dips." As for stocks listed in Hong Kong, UBS saw value in small caps with recently growing interest from southbound investors in small caps. The broker provided a list of small- and mid-cap stocks under its coverage with a Buy rating, including TOPSPORTS (06110.HK), YUE YUEN IND (00551.HK), WB-SW (09898.HK), POLY PPT SER (06049.HK), YUEXIU PROPERTY (00123.HK), ND PAPER (02689.HK), NEXTEER (01316.HK), BRILLIANCE CHI (01114.HK), KLN (00636.HK), YIHAI INTL (01579.HK), CARSGEN-B (02171.HK), CIMC ENRIC (03899.HK), DPC DASH (01405.HK), CANSINOBIO (06185.HK), XIAOCAIYUAN (00999.HK), HYGEIA HEALTH (06078.HK), ANGELALIGN (06699.HK), CHINA FOODS (00506.HK), and SINOHYTEC (02402.HK). AAStocks Financial News |
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