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Executives and analysts from UBS expressed optimism about China’s stock market in 2026, forecasting double-digit earnings growth and highlighting artificial intelligence as a key investment theme. Companies listed on the MSCI China Index are anticipated to see a total profit increase of around 10% this year, as downward pressures from depreciation ease following two consecutive years of reduced capital expenditure and as China’s anti-involution policies gradually take effect, according to Wang Zonghao, head of China equity strategy research at UBS, speaking at the 26th UBS Greater China Conference.
The anti-involution campaign in China involves a range of policies and regulatory actions aimed at limiting excessive, low-yield competition—particularly in sectors like manufacturing, technology, and renewable energy. This initiative seeks to curb overcompetition and promote more sustainable growth.
Such optimistic projections could fuel a continued market rally. Last year, the Shanghai Stock Exchange Composite Index surged by 18%, marking its strongest annual performance in nearly six years. Trading volume for A-shares hit a record CNY 420 trillion, a 63% increase from the previous year, surpassing the CNY 400 trillion threshold for the first time.
Most institutional investors now see artificial intelligence as a critical growth area. Wang pointed out that China and the United States are leading countries in this sector. He also noted that Chinese AI firms are minimally correlated with US stocks, making them appealing options for foreign investors looking to diversify their portfolios.
While the US is heavily investing in computing power to develop artificial general intelligence, China is focusing on more specialized, industry-specific applications. Wang emphasized that China has a broader range of industrial scenarios for AI than the US. Since the emergence of AI startup DeepSeek, US investors have gained a deeper understanding of Chinese semiconductor equipment and hardware companies, a trend that was evident during a roadshow held last September.
From a sector perspective, UBS has particularly recommended domestic semiconductor equipment producers and major internet companies. Semiconductor equipment companies stand to benefit from China’s push toward self-sufficiency and domestic substitution. Meanwhile, internet giants are expected to be major beneficiaries of AI, with their capital spending on AI infrastructure increasing sharply since last year, contrasting with an overall slowdown in investment. Additionally, the photovoltaic industry is poised to share in the global benefits of AI-related growth, especially in energy storage solutions.
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