UBS Adds Kuaishou, Meituan to China Focus List, Lifts Alibaba and Ping An Weighting

UBS maintains its "attractive" view on Chinese equities, emphasizing factors such as robust AI-driven growth, leadership in innovation, and ongoing chip localization. In its latest assessment, Kuaishou Technology (HK:1024) and Meituan (HK:3690) were added to the bank's China Global Equity Focus List. Furthermore, portfolio weightings for Alibaba Group (BABA, HK:9988) and Ping An Insurance (HK:2318) were increased.

Kuaishou's inclusion with a 3% portfolio weighting is driven by the company's significant advancements in artificial intelligence. UBS highlighted Kuaishou's Kling AI model as a global leader in text-to-video generation, with user engagement comparable to OpenAI's Sora. This suggests that despite near-term pressure on e-commerce and advertising revenue, investors will increasingly focus on its AI potential. Meituan was initiated with a 2% position. The bank believes the most intense phase of China's food-delivery competition has passed, anticipating a tactical rebound in the stock and steadier earnings recovery from the second quarter onward.

Alibaba Group's portfolio weighting was increased by 1 percentage point, while Ping An Insurance's weighting rose by 2 percentage points. UBS views Alibaba's full-stack AI capabilities and broad exposure to Chinese consumer spending positively. Weightings for WuXi AppTec and Xiaomi (HK:1810) were also raised by 0.5 percentage points each. Conversely, some companies like China Merchants Bank, China Mobile (HK), and Jiangsu Hengrui Pharmaceuticals were removed from the focus list, while positions in China Construction Bank, Midea Group, Yum China, China Pacific Insurance, and PICC Property & Casualty were trimmed.

This strategic move by UBS reflects its confidence in the growth potential of the Chinese economy, particularly its technology sector, supported by artificial intelligence and innovation. The bank anticipates that leading semiconductor, AI supply-chain, and internet platform companies will continue to benefit from rising AI monetization and international capital inflows. Global funds have also significantly increased their holdings in Chinese assets since early 2026, demonstrating their trust in the Chinese economy and its assets.

China is making substantial progress in accelerating domestic technological innovation in AI, semiconductor localization, and cloud computing. Chinese AI models are demonstrating leadership in the global market with improving intelligence levels and cost-effectiveness advantages. Government policies promoting innovation and investments in "new economy" sectors are contributing significantly to GDP growth.

Analysts and market expectations indicate that UBS anticipates strong earnings growth in Chinese tech stocks for 2026. Furthermore, high-single-digit returns are projected for emerging market equities by the end of 2026. These expectations are tied to improving financial conditions and capital flows, supported by a constructive macroeconomic outlook, potential Federal Reserve easing, and a softer US dollar.