UBS Predicts 10% Upsurge in MSCI China Index Driven by Profit Growth and Buy-backs, Negating GDP as a Market Driver

UBS has a positive outlook towards China, encouraged by profit growth and share buybacks, which provide the MSCI Index a 10% boost. UBS's China strategist, James Wang, suggests that the stock market's momentum isn't propelled by GDP growth, but rather by enhanced ROE and increased profits.

The MSCI China Index is likely to experience an increase of up to 10 per cent within the coming three to six months. This anticipated rise is due to the expected growth in earnings and the efforts of companies to enhance shareholder returns via buy-backs and better governance, as stated by UBS Group.

The increase will be fueled by an estimated 7% rise in earnings for firms listed on the index in the latter half of the year, along with some valuation growth, according to James Wang, the leader of China strategy at the Swiss bank, who shared this at a Shenzhen briefing on Monday.

Wang intriguingly points out that in Asian markets, where investors usually pursue robust economic growth, there's very little connection between yearly GDP growth and the performance of the stock market. He asserts that the real driving force behind the stock market's performance isn't GDP growth, but rather enhancements in ROE and profit growth.