Greater China Strategy 2H25 - Growing Under Pressure

Notwithstanding the 90-day truce on tariff escalation, we expect Sino-US relations continue to face challenges. We expect the US to eventually impose tariffs on Chinese goods that are closer to the 60% and restrictions over semiconductor equipment and design software will be tightened further to blunt China's competitiveness. US' approach to China has not changed.

China will continue to face external challenges while trying to boost domestic demand. Recent macro data points suggests that growth momentum has slowed. But, at same time, much fiscal room remains for the Chinese government to provide further heavy lifting. With the expectation of the Chinese economy staying resilient, the current consensus EPS growth forecast of 5% is achievable. The MSCI China index may re-rate to 12.5x upon any positive news on the trade front, but fair value is about 11x, about current levels.

Hence, we would prefer to sell into strength in 3Q25, and prefer to focus on sector leaders and indexed names, rather than seek further beta via exposure to second liners.

We recommend buying into the following themes:

1. AI / Robotics

2. IT hardware

3. Falling US interest rates

Join Mun Hon in this webinar to gain valuable insights on Greater China Strategy 2H25. 

Mun Hon joined UOB Kay Hian in 2012 and is currently the Head of Research for China and Hong Kong. He has over 25 years of macro research experience and was previously the Regional Strategist at Maybank-KE, Daiwa, RBS, ABN AMRO and BNP. He started his career as an Economist with the Ministry of Trade and Industry in Singapore, before moving on to institutional equity research.