UBS has reiterated an 'Attractive' rating on Chinese equities and raised its return outlook, citing accelerating AI monetization, chip localization and capital inflows as key drivers.
The bank expects mid-teens returns from Chinese equities by June 2027, up from prior projections, as it shifts portfolio weight toward sectors positioned to benefit from artificial intelligence adoption. Eva Lee, head of Greater China equities at UBS, highlighted China’s tech sector as a primary beneficiary, citing robust AI-driven growth, innovation leadership and supportive policy trends.
UBS added five stocks to its portfolio, with semiconductor and foundry-linked names prominent among them. Zhongji Innolight received a 4.0% allocation, driven by growth in its transceiver business as AI spending expands beyond compute chips to include connection devices. UBS noted that Nvidia’s recent chip design embedding co-packaged optics could further support demand for such components.
Agricultural Bank of China was also added at a 4.0% weight, while GDS and JCET Group received 3.0% and 2.0% allocations, respectively. JCET Group was identified as China’s leading outsourced semiconductor assembly and test provider, positioning it to capitalize on domestic chip production initiatives.
Innovent Biologics was added at a 2.0% weight. The bank removed six stocks from its portfolio, including China Pacific Insurance, Dongfang Electric, Kuaishou, LONGi Green, New Oriental Education and PICC Property and Casualty. Tencent’s weight was reduced by six percentage points as part of the reallocation.
