UBS Predicts 10% Upswing in MSCI China Index: Profit Growth and Buy-backs, Not GDP, Seen as Market Drivers

UBS is optimistic about China, with profit expansion and buy-backs contributing to a 10% increase in the MSCI Index. According to UBS's China specialist, James Wang, the stock market's momentum is determined not by GDP growth, but by enhancements in Return on Equity (ROE) and profit expansion.

The UBS Group predicts that the MSCI China Index could potentially see an increase of up to 10 per cent in the upcoming three to six months. This is expected to be driven by an upswing in earnings growth and companies seeking to enhance shareholder returns through stock repurchases and better governance.

The increase will be propelled by an estimated 7% rise in earnings for firms listed on the index in the latter half of the year, coupled with some valuation growth, stated James Wang, the leader of China strategy at the Swiss bank, during a Monday briefing in Shenzhen.

Fascinatingly, our examination of Asian markets, where investors usually hunt for significant economic expansion, reveals that the relationship between yearly GDP growth and the performance of the stock market is incredibly minimal," Wang stated. "The stock market isn't propelled by GDP growth, but by enhancements in ROE and the growth of profits."