Chinese Equities

Latest edition · September 18, 2026

Chinese equities en 1666500

UBS has upgraded China A-shares to Attractive and downgraded China H-shares to Neutral following 2Q26 results. The shift is driven by accelerating A-share earnings revisions and export/AI exposure, compared to negative revisions and heavy AI capex weighing on H-share returns.

Following 2Q26 earnings, UBS upgraded China A-shares to Attractive and downgraded China H-shares to Neutral. China A-share earnings accelerated to 29.4% YoY growth, driven by AI semiconductors, hardware, non-bank financials, and export leaders benefiting from operating leverage. Conversely, MSCI China earnings revisions turned negative as over 40% of the index is concentrated in weak consumer and internet sectors. Furthermore, Chinese hyperscalers are ramping AI capex by 34%, muting near-term buybacks and dividends. UBS recommends positioning across four key pillars: AI technology/hardware leaders, innovative healthcare/CDMOs, state-owned high-dividend financials, and copper-exposed materials producers.

Key takeaways from the latest edition

• 1.UBS upgrades China A-shares to Attractive and downgrades China H-shares to Neutral due to diverging earnings momentum, sector composition, and capital allocation.
• 2.A-share revenue and earnings accelerated significantly in 2Q26 (earnings up 29.4% YoY), supported by AI tech, non-bank financials, and exporters, whereas H-share growth outside financials remained muted at just 5% YoY.
• 3.Rising AI capital expenditure among Chinese hyperscalers (up 34% over the past month) is diverting cash away from share buybacks and dividends, constraining H-share distributions.

What this series covers

• Sharp divergence in H-share vs. A-share earnings
• H-shares: Growth outside financials remains muted
• Technology: AI profit pools are shifting toward semiconductors and hardware
• Financials: Improving operating trends and stronger shareholder returns
• Health care: Earnings upgrades supported by innovation and global expansion
• Materials: Leverage copper upside in 2H26
• Risk table
• Equity selection system
• Risk Information

Edition archive

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