UBS removed BYD (SZ:002594) from their China focus list over concerns that the Chinese automaker’s 4Q23 price cuts may hurt the company’s 1Q24 profitability.
“We will revisit on lower valuations and a better industry outlook.” Wrote UBS analysts in a note.
UBS maintains a strong preference for Chinese equities in its tactical strategy for Asia. In their baseline scenario, anticipating more effective measures following the government's supportive stance at the Politburo meeting in late July, analysts project a 13.8% earnings growth for MSCI China in 2023.
The extent of this earnings growth hinges on the prompt execution of additional initiatives to tackle economic challenges. Information regarding the implementation of measures aimed at boosting domestic demand, improving the employment rate, and encouraging private investment is crucial for supporting a sentiment recovery in MSCI China, currently trading at approximately 58.