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UBS has strengthened its bullish stance on Chinese equities by adding Kuaishou Technology (HK:1024) and Meituan (HK:3690) to its China Global Equity Focus List while increasing allocations to Alibaba Group, Ping An Insurance, WuXi AppTec, and Xiaomi. The brokerage said its outlook remains positive as artificial intelligence adoption accelerates and supportive government policies continue to improve market sentiment.
The investment bank reaffirmed its favorable view on China's stock market, highlighting technology companies as its preferred sector. UBS believes firms involved in AI development, semiconductor production, AI supply chains, and internet platforms are well positioned to benefit from growing AI commercialization, innovation, chip localization, and renewed foreign capital inflows.
Kuaishou was added with a 3% portfolio weighting, reflecting UBS's confidence in the company's AI capabilities. The bank pointed to Kling AI, Kuaishou's text-to-video generation model, which it described as a global leader with user engagement levels comparable to OpenAI's Sora. Although the company faces near-term pressure in its e-commerce and advertising businesses, UBS expects investors to increasingly recognize its long-term AI growth potential.
UBS also initiated a 2% portfolio weighting in Meituan, citing signs that China's intense food delivery competition is easing. The brokerage expects a more rational competitive environment to support stronger earnings recovery beginning in the second quarter, creating room for a tactical rebound in the stock.
Alongside the new additions, UBS removed China Merchants Bank, China Mobile (HK), and Jiangsu Hengrui Pharmaceuticals from its focus list. The bank also increased its portfolio weighting in Ping An Insurance by two percentage points, Alibaba by one percentage point, and WuXi AppTec and Xiaomi by 0.5 percentage points each. At the same time, it reduced exposure to China Construction Bank, Midea Group, Yum China, China Pacific Insurance,and PICC Property & Casualty.
Looking ahead, UBS projects mid-teens returns for Chinese equities through June 2027, driven by improving corporate earnings, continued policy support, and the long-term growth opportunities created by artificial intelligence across China's technology sector.
