Barclays now sees two Fed cuts this year, says jumbo Fed cuts ’very unlikely’
Investing.com-- China’s stock market rally could face corrections if regulators step in, overseas markets stumble, or domestic policy support is delayed, UBS analysts said, warning that liquidity-driven gains may be vulnerable in the coming months.
“Regulatory intervention could be one, though the likelihood is low at this stage," UBS analysts said, adding that A-share margin financing remains modest as a share of market capitalisation and the Shanghai Shenzhen CSI 300 is only up 8% year-to-date.
They added that a sharp sell-off in global equities would hit Hong Kong shares harder than mainland A-shares, while expectations for fresh policy support in October are keeping sentiment elevated.
Any delay to such measures, they said, could disappoint investors.
The warning comes as Chinese equities have risen despite weaker economic data and earnings downgrades.
The CSI300 gained 4% in August and the Hang Seng Index rose 2%, driven by strong retail flows, an 80% jump in trading volumes, and higher margin financing balances, UBS analysts noted.
UBS said such divergences between fundamentals and prices can last for up to a year in the A-share market, but typically only two to three months in Hong Kong.
The bank recommended A-share technology, media and telecom (TMT), brokers and internet stocks for potential upside, while retaining exposure to defensive banks and telecoms.
For H-shares, it expects consolidation, citing negative earnings revisions, higher HIBOR funding costs and delays in new product launches.