Business
UBS Foresees 10% Upsurge in MSCI China Index: A Focus on Profit Growth and ROE, Not GDP
UBS is optimistic about China, as gains in profits and buy-backs increase the MSCI Index by 10%
'The stock market is propelled not by GDP growth, but by enhancements in ROE and profit growth,' says James Wang, UBS's strategist for China.
'The stock market is propelled not by GDP growth, but by enhancements in ROE and profit growth,' says James Wang, UBS's strategist for China.
According to UBS Group, the MSCI China Index is likely to experience an increase of up to 10 per cent within the coming three to six months. This potential rise is attributed to a surge in earnings growth and companies' initiatives to enhance shareholder returns via buy-backs and better governance.
The increase will be fueled by an average 7% rise in company profits on the index during the latter half and some value growth, according to James Wang, the lead of China strategy at the Swiss bank, who spoke at a briefing in Shenzhen on Monday.
Intriguingly, Wang noted that our study of Asian markets, which are usually the go-to for investors seeking substantial economic growth, reveals a surprisingly weak link between yearly GDP growth and stock market performance. Wang added that it's not GDP growth that fuels the stock market, but rather enhancements in return on equity (ROE) and profit growth.
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