Amid a turbulent start to the year for Chinese stocks, UBS Global Wealth Management has issued a warning to investors, recommending to "stay on the defensive side.” This comes as market volatility is expected to rise due to anticipated policy changes by the incoming U.S. administration.
In an interview with Bloomberg Television, Eva Lee, head of Greater China equities at UBS, suggested that investors focus on stocks offering dividend yields above 6%, significantly higher than the 2% government yields. She highlighted a 4% yield gap as particularly appealing, recommending sectors such as banks, utilities, and energy.
Chinese stocks have had a rough start to 2025, with a 2.9% decline on Thursday marking the worst beginning to a year in nearly a decade. The CSI 300 Index continued its downward trend on Friday. Although last year’s stimulus measures have helped stabilize the market, traders are wary of economic uncertainties as Trump’s inauguration approaches.
China plans to issue more ultra-long special treasury bonds in 2025 to support consumer product trade-in programs and major projects. Meanwhile, the 10-year government bond yield fell below 1.6% on Friday, reflecting economic concerns and expectations for further monetary easing.
Furthermore, the Trump administration plans to significantly increase tariffs on Chinese imports, with rates potentially rising by 20 percentage points. These developments are likely to impact both the Chinese and U.S. economies, affecting consumer prices and industrial production.
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