Chinese stocks poise for high single-digit returns through end-2024 – UBS By Investing.com

Investing.com– UBS analysts said they expect Chinese stocks to deliver high single-digit returns through the end of 2024, citing improved prospects for a recovery in profits and expectations of more support for the housing market.

Specifically, the brokerage expects the index — which is a mix of Chinese bluechips, Hong Kong and other sectors — to deliver those returns. The index is currently trading up about 4.5% this year.

UBS said traders should recommend a “barbell approach” to China, with positioning in defensive and growth sectors. The brokerage recently upgraded China to “Top Favorite” in its Asia strategy and sees stronger returns from the country than Asia except Japan.

In the short term, UBS recommended adding exposure to China’s growth stocks and increasing defensive exposure over the medium to long term, saying investors should position themselves for a “slowing growth environment” in the country.

The brokerage said it favors stocks in the auto, consumer goods, healthcare, technology and online gaming sectors.

Notable stocks recommended by UBS include Alibaba Group Holdings (NYSE: ), China Communications Construction (SS: ), JD.com Inc (NASDAQ: ), NetEase Inc (NASDAQ: ) and Tencent Holdings Ltd (HK: ).

While the MSCI China index reflected some strength in Chinese stocks, the country’s benchmark and indexes have both posted steep losses in recent sessions and traded near six-month lows.

Some overseas buying helped cushion losses in the Hong Kong index, although the index had hit a three-month low in early August.

Sentiment toward China has been hurt by a series of weak economic readings in the country over the past two months, while promises of support from Beijing have provided little relief.