Business
UBS Forecasts 10% Rise in MSCI China Index Amid Profit Growth and Buy-Backs: A Shift from GDP to ROE and Profit Growth as Market Drivers
UBS is optimistic about China, with profit increases and buy-backs resulting in a 10% rise in the MSCI Index. UBS's China strategist, James Wang, believes that the stock market is not driven by GDP growth, but by enhancements in Return on Equity (ROE) and profit expansion.
UBS Group predicts that the MSCI China Index is likely to see an increase of up to 10% in the coming three to six months. This is due to an expected uptick in earnings growth and businesses' strategies to enhance shareholder returns through stock buy-backs and better governance.
The increase will be propelled by an average profit growth of 7% for firms on the index in the latter half of the year, along with some valuation growth, according to James Wang, the lead of China strategy at the Swiss bank. He shared this during a briefing in Shenzhen on Monday.
"Wang intriguingly states that our study of Asian markets, where investors usually look for robust economic growth, reveals a very weak link between yearly GDP growth and stock market performance. He asserts that the stock market isn't fueled by GDP growth, but by gains in ROE and profit growth."
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