China Equity Strategy "H226E A-share outlook: earnings recovery; micro l..."

Research evidence excerpt

China Equity Strategy "H226E A-share outlook: earnings recovery; micro l..."

Global Research

4 June 2026ab

China Equity Strategy Equity Strategy

ChinaH226E A-share outlook: earnings recovery; micro

liquidity; and tech crowdedness Lei Meng

Strategist

lei.meng@ubs.com

+86-21-3866 8939

Earnings growth set to accelerate further Yu Sheng

We expect 11% earnings growth for all A-shares in 2026E in our base scenario, up from Strategist

3.9% in 2025. The Q126 results indicate the earnings recovery is accelerating: non- S1460524080001

yu.sheng@ubs.comfinancial earnings grew 11.8% YoY (vs. +0.8% in 2025); non-financial GPM and NPM

+86-21-3866 4873

rose 0.6ppt and 0.3ppt YoY, respectively. In the medium term, we think the rollout of

more supportive policies, progress in anti-involution and rising contribution of overseas James Wang

revenue can help margin expansion. The recent pickup in industrial profit growth and Strategist

james-zb.wang@ubs.comupward revisions of consensus earnings indicate improving earnings this year.

+852-3712 2557

Micro liquidity: where do the A-share market net inflows orginate? Tommy Tang, CFA

Different types of inflows into the market are structurally lowering the equity risk

tommy.tang@ubs.com

premium. 1) Household deposits are progressively entering the market via indirect +852-2971 8357

channels. 2) Balance of margin financing continues to hit new highs, although share of

Robin Xufree-float market cap remains reasonable. 3) The scale and number of new hedge fund

Analyst

product registrations continues to rise. 4) The expansion of sector and thematic ETFs has

S1460511010012

bolstered the share price performance of industry leaders. 5) As the "wealth effect" bin.xu@ubs.com

improves, issuance of active mutual funds is expected to marginally recover.