UBS China Head: Chinese Assets Are Now a Global Safe Haven

As global uncertainties and geopolitical tensions continue to escalate, international institutional investors are increasingly viewing Chinese assets as a safe haven due to their risk resilience and low correlation attributes, according to the head of China global markets at UBS.

Interest in China’s capital markets is steadily growing among international investors, praised for its comprehensive industrial chain, stable policy environment, substantial strategic reserves, diverse energy sources, and a robust capacity to withstand external shocks, explained Thomas Fang during a media briefing yesterday.

The earnings of companies listed on the mainland are entering an upward trajectory, supported by easing inflation pressures, boosting domestic demand, and a stabilizing property market, Fang noted.

China’s reliance on oil and natural gas for power production is roughly 3 percent, significantly lower than the nearly 20 percent seen in most other countries, said Meng Lei, a China equities strategist at UBS Securities. This lesser dependency contributes to the resilience of Chinese mainland-listed stocks amid the market correction seen in March.

Companies listed on the mainland experienced an overall growth of over 7 percent in the first quarter, with a rise of 12 percent when excluding the financial sector. Even without petrochemical firms, growth remains between 11 and 12 percent, a notable improvement from less than 3 percent last year.

Despite fluctuations in oil prices, the overall earnings recovery trend among mainland-listed firms has shifted into double-digit expansion from stagnation in 2023 and 2024, Meng highlighted.

The current equity risk premium for mainland shares is considerably higher than its historical average, while U.S. stocks have dipped into negative territory, Meng added. This suggests that Chinese stocks present a more attractive valuation in terms of cost performance.

Looking ahead, Meng predicts that the main growth driver will be earnings expansion. He anticipates that ongoing net inflows into exchange-traded funds will push leading technology stocks to outperform the broader market.