UBS Global Equity Strategy: Why We Prefer China and the US to Japan
Summaries are public. PDF access requires an active membership; all members have the same access. Sign in
UBS favors allocating global equity exposure to China and the United States over Japan. While Japan possesses long-term structural positives, such as improved corporate governance, high cash reserves, and increasing activist investor engagement, its current short-term macroeconomic environment is highly unfavorable. Global PMI new orders are declining, which historically causes Japanese equities to underperform due to the market's high operating leverage and sensitivity to external demand.
Furthermore, rising energy prices adversely affect Japan significantly, as the nation relies heavily on net oil and gas imports. This dynamic pressures corporate margins through external accounts and elevated corporate costs. Wage growth nearing 25-year highs and severe labor shortages further compress profitability. Additionally, Japanese equity valuations relative to global peers are near 10-year highs, share buyback momentum is flattening, and foreign capital flows remain cautious.
Conversely, the United States typically outperforms during periods of slowing global PMI, supported by robust technology earnings, AI-related capital expenditure, and a higher quality market profile. China's appeal is driven by attractive valuations, ongoing policy support, structural export shifts, improving liquidity, and enhanced technological competitiveness. Despite domestic property and consumption structural risks, China's trade surplus continues to grow, and global investor positioning remains underweight, offering significant room for capital return. UBS recommends reducing exposure to Japan's highly cyclical market in favor of the more resilient earnings and policy support found in the US and China.
Key exhibits
Exhibit 1
Exhibit 2
Exhibit 3
Exhibit 4
Exhibit 5
Exhibit 6
Exhibit 7
Exhibit 8
Exhibit 9
Exhibit 10
Exhibit 11
Exhibit 12
Exhibit 13
Exhibit 14
Exhibit 15
Exhibit 16
Exhibit 17
Exhibit 18
Exhibit 19
Exhibit 20
Exhibit 21
Exhibit 22
Exhibit 23
Exhibit 24
Exhibit 25
Exhibit 26
Exhibit 27
Exhibit 28
Exhibit 29
Exhibit 30
Exhibit 31
Exhibit 32
Exhibit 33
Exhibit 34
Exhibit 35
Exhibit 36
Exhibit 37
Exhibit 38
Exhibit 39
Exhibit 40
Exhibit 41
Exhibit 42
Exhibit 43
Exhibit 44
Exhibit 45
Exhibit 46
Exhibit 47
Exhibit 48
Exhibit 49
Exhibit 50
Exhibit 51
Exhibit 52
Exhibit 53
Exhibit 54
Exhibit 55
Exhibit 56
Exhibit 57
Exhibit 58
Exhibit 59
Exhibit 60
Exhibit 61
Exhibit 62
Exhibit 63
Exhibit 64
Exhibit 65
Exhibit 66
Exhibit 67
Exhibit 68
Exhibit 69
Exhibit 70
Exhibit 71
Exhibit 72
Exhibit 73
