Business
UBS Foresees 10% Upsurge in MSCI China Index: Profit Growth and Buy-backs as Key Drivers, Not GDP
UBS is optimistic about China, as increased profits and buy-backs boost the MSCI Index by 10%
'The stock market's momentum is not fueled by GDP growth, but by enhancements in ROE and growth in profits,' says James Wang, UBS's strategist for China.
'The stock market's momentum is not fueled by GDP growth, but by enhancements in ROE and growth in profits,' says James Wang, UBS's strategist for China.
The MSCI China Index is expected to increase up to 10 per cent within the forthcoming three to six months. This prediction, made by UBS Group, is based on the anticipated improvement in earnings growth and the probability of companies trying to enhance shareholder returns by implementing buy-backs and enhancing governance.
The increase will be propelled by an average profit growth of 7 percent for firms listed on the index during the latter half of the year, along with some valuation increase, according to James Wang, the Swiss bank's Chief of China strategy, during a Monday briefing in Shenzhen.
"Surprisingly, our study of Asian markets, where investors usually chase significant economic growth, reveals that the connection between yearly GDP growth and stock market performance is incredibly weak," Wang stated. "It's not GDP growth that drives the stock market, but enhancements in ROE [return on equity] and profit expansion."
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