UBS(US:UBS) Zheng Quan Shi Bao Wang·2025-11-18 03:24Core Viewpoint - UBS Investment Bank's China equity strategy head Wang Zonghao predicts a prosperous year for the Chinese stock market in 2026, driven by several favorable factors continuing from 2025, including advancements in innovation, particularly in AI, supportive policies for private enterprises and capital markets, ongoing fiscal expansion, ample liquidity under loose monetary policy, and potential capital inflows from domestic and foreign institutional investors [1] Group 1: Market Drivers - Continued development in innovative sectors, especially AI, is expected to support the market [1] - Supportive policies for private enterprises and capital markets will play a crucial role [1] - Ongoing fiscal expansion and sufficient liquidity due to loose monetary policy are significant factors [1] - Potential capital inflows from domestic and foreign institutional investors are anticipated [1] Group 2: Earnings and Valuation - Unlike the substantial valuation increases seen this year, 2026's stock performance is expected to be more driven by earnings [1] - Projected earnings per share growth of 10% is anticipated, supported by "anti-involution" measures and a decrease in depreciation and amortization expenses [1] - The target for the MSCI China Index by the end of 2026 is set at 100, indicating a 14% upside from current levels [1] Group 3: Sector Preferences - The outlook remains positive for sectors such as internet, hardware technology, and brokerage firms [1] - High-dividend stocks that are experiencing declining yields have been removed from consideration [1] - As global growth improves, some "overseas" stocks are expected to be included in the investment strategy [1]