Anticipating increased market volatility, UBS Global Wealth Management (UBS, Financial) is advising Chinese investors to take a more defensive approach as they begin the turbulent new year 2025 for equities. It comes on the heels of expectations of Trump's key policy of higher tariffs on Chinese imports.
In sectors such as banking, utilities and energy, dividend yields above 6 percent, though, will be of great interest to investors, says Eva Lee, head of Greater China equities at UBS. She adds that a gap of around 4 per cent on bonds with a 2 percent yield still looks like a good investment.
Early 2025 was a rough start for the Chinese stock market, with the CSI 300 Index recording its first weekend open to the year in the most recent decade. The downturn is owed to lacklustre consumption and impending geopolitical strains, in particular around trade with the United States.
Under President-elect Trump, whom Beijing's leaders have shown little ability to influence, his proposed tariffs include a 10 percent increase on Chinese imports aimed at reducing trade deficits but with risks of escalating to a trade war. Such measures are likely to affect both economic systems, with higher prices for consumers and supply problems around the world.
China will also issue more ultra-long special treasury bonds in 2025 to support trade-in programs for consumer products and to finance key projects in response to these challenges, indicating attempts to boost demand domestically amid relentless external economic pressure.
UBS's recommendation is part of wider investor sentiment to find stability in defensive sectors with high yields in the current market environment. Investors could do well by focusing on companies that have viable dividend payouts in strong industries, as China's companies are expected to be more volatile.
