UBS Securities Meng Lei: A-share market may regain upward trend, recommend increasing allocation to growth style.

On May 14, Meng Lei, an equity strategy analyst at UBS Securities in China, stated that according to UBS Securities' macro team in China, the total weighted average tariff rate on Chinese products imposed by the United States is currently about 43.5%. A substantial reduction in tariffs between China and the US may help A-shares market regain its upward trend. Data shows that all A-share profits grew by 3.5% year-on-year in the first quarter of 2025, with the non-financial sector benefiting from a 4.2% year-on-year profit growth due to the increase in GDP growth in the first quarter. Considering the low base effect and the introduction of more supportive policies, it is expected that A-share profits will show a seasonally rising trend this year. Due to the current significant discount of A-shares market compared to global emerging markets, global funds may continue to flow into A-shares market. In the short term, Meng Lei recommends investors to strategically increase allocation to growth styles to increase portfolio resilience, as small-cap stocks may outperform large-cap stocks in the background of rebounding market turnover due to higher exposure to overseas income. From an industry perspective, industries with high beta, industries benefiting from domestic policy advantages, and industries that have previously underperformed the market due to tariff issues are expected to attract investor attention.