UBS analysts state that among Asian stocks, they are most optimistic about Chinese stocks and have added two stocks to their watch list, considering internet stocks and defensive stocks to be the best investment portfolio for the Chinese market.
UBS expects the Chinese market to outperform the entire Asian market this year, with the MSCI China Index achieving high single-digit returns.
The brokerage has proposed a "barbell" investment strategy, holding stocks in defensive sectors (such as finance, utilities, energy, and telecommunications) and growth sectors (mainly internet stocks).
To this end, UBS has added e-commerce company JD.com to their China watch list, citing its stable revenue growth and strong profit margins.
JD.com's strong cash flow also indicates that the company might increase buybacks, and recent stimulus measures, particularly those targeting the real estate market, are expected to benefit the company.
UBS analysts stated, "The main risk to our view is the intensifying competition in China's e-commerce sector, which could lead to margin declines and increased sales and marketing expenses."
Among defensive stocks, UBS has added China Communications Construction Company to their China watch list.
The brokerage stated that the company is expected to benefit from a series of measures launched by Beijing to support real estate and infrastructure, particularly plans to increase spending on new infrastructure projects.
