UBS Forecasts 10% Upswing in MSCI China Index: Profits and Buy-backs to Outshine GDP Growth, Says China Strategist James Wang

UBS displays optimism towards China, as profit expansion and repurchases provide a 10% increase to the MSCI Index. 'The stock market isn't driven by GDP growth, but by enhancements in ROE and profit expansion,' states James Wang, UBS's strategist for China.

UBS Group predicts that the MSCI China Index is likely to see up to a 10% increase in the coming three to six months. This forecast is due to expected growth in earnings and companies' efforts to enhance shareholder returns via 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, along with some valuation growth, said James Wang, the Swiss bank's chief of China strategy, during a Monday briefing in Shenzhen.

Fascinatingly, our examination of Asian markets, which are usually the target of investors in pursuit of significant economic development, reveals a very slight link between annual GDP expansion and stock market performance," Wang stated. "The stock market's key influence is not the growth of GDP, but enhancements in ROE and profit expansion."