UBS: China Equity Strategy — Near-Term and Full-Year 2026 A-Share Outlook in Charts
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UBS observes that Chinese A-shares have established a new upward trend in early 2026, following a volatile fourth quarter in 2025. Previous headwinds, including high global tech valuations, peak crowding in A-share innovation themes, and year-end profit-taking, have now transitioned into tailwinds. This shift is supported by a strong start for technology stocks, anticipated portfolio repositioning, and favorable policy signals such as the early announcement of consumer subsidy plans.
Trading momentum confirms this renewed optimism. The average daily turnover for A-shares surged to RMB 2.46 trillion in early 2026, up from RMB 1.73 trillion in 2025, while margin balances reached a historic high of RMB 2.58 trillion. UBS projects that All-A earnings growth will accelerate to 8% in 2026 from 6% in 2025, driven by faster nominal GDP expansion, narrowing PPI contraction, and supportive policy measures.
From a valuation standpoint, the A-share equity risk premium remains elevated above historical averages, suggesting further room for re-rating. UBS favors growth over value and cyclicals over defensives, maintaining a balanced stance between large and small caps. Sector preferences include overweight positions in electronics, telecommunications, non-bank financials, defense, and chemicals. Key catalysts include ChiNext and STAR Market earnings previews due in late January.