UBS named a number of Chinese stocks it says have remained “resilient” during times of heightened geopolitical tensions between the United States and China. Chinese stocks were volatile after rising tensions between the United States and China over alleged spy balloons shot down over North America in February. In a March 13 note to clients, the Swiss bank said greater market volatility is expected when a possible U.S. ban on investment in certain Chinese sectors is announced. To combat such fluctuations in investors’ portfolios, UBS has identified stocks that it believes have historically held up during times of heightened geopolitical tension. Additionally, the investment bank said it can gauge the extent to which the market has priced in geopolitical concerns based on the relative valuation of these stocks against the MSCI China Index. The following four long-listed stocks have seen less than 3% change in share price, on average, over the past eight geopolitical events. Hong Kong-listed gas distributor China Resources Gas, solar engineering firm Zhejiang Jinggong and aviation company China Avionics Systems were among the least volatile stocks during the US-China tensions, according to UBS. Shares of China Resources Gas and China Avionics Systems are also expected to rise 27% and 33% over the next 12 months, according to analysts’ average price target compiled by FactSet. China Resources Gas and food processor Fujian Sunner are available to US investors through the Global X MSCI China Utilities ETF and the MSCI China Consumer Staples ETF. “We continue to favor the A-share market given its historical outperformance in times of heightened geopolitical tensions and as a key beneficiary of excess deposit flows,” said UBS strategists led by James Wang. The Swiss bank said stocks that tend to outperform during times of geopolitical stress tend to be domestically focused, less foreign-owned, and stable and defensive. By contrast, UBS said the 20 stocks that have historically performed the worst during times of geopolitical tension tend to be listed in the United States and generally belong to the internet and biotechnology sectors. The bank also said the gauge is currently a notch above the historical average, indicating that the market has priced in a high level of geopolitical concern.
The 4 stocks to buy if U.S.-China geopolitical fears continue to rise: UBS
By xjs53
