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.
What Happened: UBS Global Wealth Management has advised investors in Chinese stocks to adopt a defensive strategy. This recommendation comes as consumption remains subdued and market volatility is anticipated to increase due to impending higher tariffs by US President-elect Donald Trump, Bloomberg reported on Friday.
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.
Why It Matters: The advice follows Chinese stocks experiencing a drop right after resuming trading after New Year’s Day. The drop was attributed to a slowdown in manufacturing growth. The Caixin/S&P Global manufacturing purchasing managers’ index for December fell to 50.5, missing analyst expectations. This slowdown is compounded by geopolitical tensions, including a semiconductor embargo from the U.S. and concerns over potential tariffs.
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.
Price Action: As per Benzinga Pro, in after-hours trading, Alibaba Group Holding Ltd – ADR BABA slipped 0.047%, Baidu Inc BIDU rose 0.34%, and JD.com Inc JD edged up 0.18%. During the same period, Nio Inc – ADR NIO and Xpeng Inc – ADR XPEV were up nearly 1%.
Read Next:
Disclaimer: This content was partially produced with the help of Benzinga Neuro and was reviewed and published by Benzinga editors.
Image via Shutterstock
© 2025 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
Comments
Trade confidently with insights and alerts from analyst ratings, free reports and breaking news that affects the stocks you care about.
