UBS China Industrials: February Exports Off to a Strong Start
Summaries are public. PDF access requires an active membership; all members have the same access. Sign in
UBS's February China industrials report indicates a robust start to the year for exports, though rising raw material costs and yuan appreciation are pressuring margins. Overseas demand for construction machinery and heavy trucks remained strong, with heavy truck sales growing 18% year-over-year. Excavator exports rose 13%. However, escalating geopolitical tensions involving the US, Israel, and Iran could negatively impact Chinese construction machinery and heavy truck sales in the Middle East, a region that currently accounts for less than 10% of total sales. Infrastructure fixed-asset investment is projected to grow modestly by 1.4% in 2026 and 0.5% in 2027. In the shipbuilding sector, newbuilding prices fell 1.2% month-over-month, while second-hand tanker prices gained 6%. New orders surged 101% year-over-year, driven by VLCC demand. Automation demand is recovering modestly, led by semiconductors, lithium batteries, and electronics. AI data center capital expenditure is increasingly impacting the machinery sector, particularly in machine tool demand for diesel engines and liquid-cooling components. Humanoid robotics remains an active theme, with Tesla's Optimus Gen 3 progress being a key catalyst for the first quarter. UBS maintains Buy ratings on Zoomlion, XCMG, and Hongfa Technology.