UBS China strategist: A-shares may rise further, recommends betting through tracking small and medium cap index options.

UBS China strategists expect the bullish trend in A-shares to further continue. The firm's sell-side team suggests betting on the rise in options or call spread options tracking the China small and mid-cap stock index, which they find more attractive in the tradable options field. According to UBS, it is anticipated that the profit growth rate of A-shares may increase to 8% by 2026, higher than the 6% in 2025. Despite the stock market's rise this year, valuations remain attractive, with structural revaluation being supported by factors such as declining risk-free interest rates, household savings moving into the market, long-term fund inflows, and ongoing market value management reforms. Small and mid-cap stocks have a more balanced industry allocation, with a higher proportion in the technology sector, while the implied volatility of the CSI 500 and CSI 1000 indices has dropped from their October peak.