China A-shares

17 September 2026, 21:00 UTC Chief Investment Office GWM Investment Research

China A-shares CIO View: China A-Shares Adrian Zuercher, Head CIO Global Asset Allocation, UBS AG Hong Kong Branch Chun Lai Wu, Head CIO Asia Asset Allocation, UBS AG Hong Kong Branch Kasey Wang, CFA, Strategist, UBS AG Hong Kong Branch Christy Yuen, Strategist, UBS AG Hong Kong Branch

Attractive • China's macroeconomic backdrop remains uneven, characterized by weak domestic demand and resilient exports. Additional policy support is likely to remain targeted toward strategic sectors, including advanced manufacturing, technology innovation, and industrial upgrading.

• We upgrade A-shares to Attractive, reflecting stronger earnings momentum and greater exposure to advanced technology, exporters, and shareholder returns. Source: UBS • We maintain an Attractive view on onshore high-dividend stocks.

Our view Year to date, returns for Chinese equities have been quite diverse Fig. 1: China’s K-shaped growth across sectors, with A-shares in information technology and energy divergence continues to widen outperforming, and consumption-related sectors underperforming. The recently concluded earnings season reinforced a bifurcated growth backdrop, with strength concentrated in AI-linked technology, while consumer-facing sectors continued to grapple with weak domestic demand and cautious spending trends.

China's economy continues to display a pronounced two-speed dynamic, with growth increasingly concentrated in technology, manufacturing, and export-oriented sectors while domestic demand remains subdued. August data reinforced this divergence. Industrial production accelerated, driven Source: WIND, UBS, as of 31 August 2026 by equipment manufacturing and high-tech industries, while exports remained a key pillar of growth amid strong global demand for AI-related products. By contrast, the domestic economy remains on a softer footing. Retail sales growth continued to lag expectations, fixed-asset investment remained weak, and labor market conditions showed little sign of a meaningful improvement. Inflation indicators have turned modestly firmer, suggesting some stabilization in pricing conditions, although not yet to a degree that would signal a broad-based recovery in domestic demand.

The policy backdrop remains broadly unchanged, with policymakers prioritizing the quality of growth and long-term competitiveness over broad-based stimulus. Support continues to be directed toward strategic areas such as technological self-sufficiency, AI infrastructure, and broader industrial upgrading initiatives. While authorities remain committed to stabilizing the property market, recent signs of improvement have been largely confined to tier-one cities, with activity across lower-tier markets remaining subdued. Looking ahead, we expect any additional policy easing

This report has been prepared by UBS AG Hong Kong Branch. Please see important disclaimers and disclosures that begin on page 4.

to remain measured and concentrated in sectors linked to AI, advanced manufacturing, and strategic infrastructure, while consumption-oriented sectors remain dependent on a more sustained recovery in household demand.

Against this backdrop, we upgrade China A-shares to Attractive, reflecting their noticeably stronger onshore earnings outlook, and our preference for sectors benefiting from AI investment, industrial upgrading, and policy support over those reliant on a recovery in consumer demand. We retain an Attractive stance on onshore high-dividend equities for their defensive characteristics, resilient cash flows, and ability to provide portfolio stability.

China A-shares: Upgrade to Attractive

We are upgrading China A-shares, as the market provides more direct exposure to the parts of the economy benefiting from the ongoing AI and industrial upgrading cycle. Compared with offshore Chinese Fig. 2: Sustained profitability gains in equities, the MSCI China A Onshore Index has a greater weighting China A-shares in industrials, electrical equipment, semiconductors, and technology Profit margins of MSCI China, MSCI China A hardware companies, many of which are positioned upstream in the AI Onshore…