China Tech: Ignore Headlines, Focus on Growth

Global wealth management chief investment officer at UBS, Mark Haefele, is advising investors to concentrate on the resilient fundamentals of the China tech sector, despite recent reports suggesting that companies like Alibaba, Baidu, and BYD might be added to a US military support list. Although such news initially caused Hong Kong-listed shares to underperform, UBS stresses that the report is unconfirmed and that companies involved have refuted the claims.

The bank argues that the ongoing advancements and significant year-over-year increase in AI capital expenditure within China's AI firms present a strong case for investment. With China's AI spending projected to grow substantially compared to US spending, there remains ample room for expansion and development. This fundamental strength, UBS believes, should outweigh short-term market volatility.

Furthermore, UBS points to positive diplomatic developments, noting that the alleged Pentagon letter predates recent trade truce agreements between the US and China. The potential for future high-level meetings between leaders suggests a focus on stability and de-escalation. Consequently, UBS maintains a high conviction in China tech equities, viewing the recent market correction as an attractive entry point for investors.