UBS: The Hang Seng Index targets 30,000 points next year, favoring the Internet, technology hardware and brokerage sectors

The Zhitong Finance App learned that UBS released a research report saying that it is expected that the Chinese stock market will experience another positive performance in 2026, mainly due to the continuation of many favorable factors in 2025, including: (1) progress in innovation, especially in the field of artificial intelligence; (2) a relaxed policy environment for private enterprises and capital markets; (3) continued fiscal expansion and abundant liquidity under a loose monetary policy; (4) potential capital inflows from domestic and foreign institutional investors. However, the driving force of these factors may not be as strong as in 2025, making it difficult for the valuation multiples to expand significantly again.

The bank expects stock price performance in 2026 to be more driven by profit growth. MSCI China's earnings per share are expected to increase by about 10% in 2026, mainly due to anti-domestic accounting policies and a reduction in depreciation and amortization expenses. The bank's target for the Hang Seng Index next year is 30,000 points, which is equivalent to predicting next year's price-earnings ratio of 13.5 times. The index's earnings per share are expected to increase 8% next year.

If the profit margin of the industry affected by the “anti-internal roll back” policy rises to half of the historical average, it can increase the MSCI China Index's earnings forecast by about 3 percentage points per share, while the decline in capital expenditure can contribute an additional 1 percentage point. The bank continues to prefer the Internet, technology hardware, and brokerage sectors, while excluding high-yield stocks (because their yields have been lowered) and increasing its holdings of some “going overseas” concept stocks to benefit from next year's global economic improvements.

UBS indicates that high-dividend stocks have performed well in the past five years, but their appeal has declined. For example, there are currently almost no financial stocks that still have a dividend rate of 6% or more. As a result, the bank changed to allocate some “overseas” concept stocks. These companies have shown steady profits and profit resilience in the face of tariff uncertainty. The bank indicates that there is currently no clear preference for A shares and H shares. Both have supporting factors: A shares benefit from domestic and foreign capital inflows and profit improvements brought about by the “anti-domestic roll” policy, while H shares benefit from AI themes and the continued inflow of foreign and southbound capital. UBS listed some “overseas” concept stocks. The shares listed in Hong Kong include Yao Ming Kangde (02359), Fuyao Glass (03606), and Luoyang Molybdenum (03993).