UBS Evaluates Chinese Stocks Ahead of National People's Congress

UBS strategists have adopted a cautious stance on the Chinese stock market due to a challenging start predicted for 2025. Local A-share investors are reported to be reluctant to seize buying opportunities influenced by various factors. UBS derivatives strategist Shane Carroll noted that the bank's Chinese equity sales team has identified several deterrents for investors. These factors include the absence of positive market catalysts until the National People's Congress (NPC) in March, potential risks associated with a future Trump administration, and the rapid depreciation of the renminbi.

UBS Research forecasts a volatile macro environment throughout 2025, predicting that slowing growth will lead to lower interest rates. For investors seeking defensive stock positions with upside potential, UBS recommends a strategy that utilizes double-digit options to combine higher S&P 500 (SPX) positions with lower interest rates, capitalizing on the positive implied correlation among these assets.

This strategy reflects UBS's broader outlook on financial markets for 2025, accounting for the complex interplay between geopolitical events, monetary policy, and market volatility.