UBS Equities-China A-Share Style Guide _Market rises, factors fall_ Fang-113861678

ab3 March 2025Global ResearchChina A-Share Style GuideMarket rises, factors fallWhat is the current investing environment?Macroeconomic drivers' explanatory power continued to increase in February, as the impact of US Yield 2Y rose from 7% to 8%. Pair-wise correlations across the equity market continued to decrease, while cross-sectional volatility has risen. We think the trends reflect lower price co-movements and more stock opportunities.What is the market valuation?China's A-share market valuation increased from 12.6x 12-month forward PE in January 2024 to 12.8x in February 2025. At the sector level, IT and healthcare valuations remained higher than other sectors. In addition, real estate and financials valuations remained at historical highs.What is working?Style factors suffered losses in February, with almost all factors recording negative returns. Low Risk factors had the biggest drawdown, with 12-month Low Price Beta and 12-month Low Volatility underperforming by 8% and 7%, respectively. Value and all its subfactors suffered losses, with 12-month forward Earnings Yield down 3%. Momentum factors showed some dispersions, with Revision to 12-month forward EPS recording a small positive return, posting 1% on a long-short basis, while 12-month Price Momentum declined 2%.Monthly long-short style returns: MSCI China-A onshore (February 2025)Source: UBS Quant Database. Note: Size and sector neutral, cap weighted; price beta and volatility calculated as low minus highThis report has been prepared by UBS Securities Asia Limited. ANALYST CERTIFICATION AND REQUIRED DISCLOSURES, including information on the Quantitative Research Review published by UBS, begin on page 12. UBS does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision.EquitiesChinaQuantitativeCathy Fang, PhDAnalyst cathy.fang@ubs.com +86-21-3866 8891Paul WinterAnalyst paul-j.winter@ubs.com +61-2-9324 2080Will StephensAnalyst will.stephens@ubs.com +852-3712 3892Lynce Wang, FRMAnalystS1460522090001 lynce.wang@ubs.com +86-21-3866 8638Oliver Antrobus, CFAAnalyst oliver.antrobus@ubs.com +61-3-9242 6467Luke Brown, CFAAnalyst luke.brown@ubs.com +61-2-9324 3620James CameronAnalyst james-a.cameron@ubs.com +61-2-9324 2074Aaron Guo, CFAAnalyst aaron.guo@ubs.com +852-2971 7705Anita Mansbridge, FIAAAnalyst anita.mansbridge@ubs.com +852-2971 7302Jia Li Mok, CFAAnalyst jia-li.mok@ubs.com +65-6495 5772Jessica SUAnalyst jessica-hong.su@ubs.com +852-3712 2059 China A-Share Style Guide 3 March 2025ab 2China A-Share Style GuideUBS ResearchMarket overviewWhat is driving the markets?Macroeconomic factors help provide a top-down view of market drivers. We look at a number of globally relevant macroeconomic factors and observe their levels and change in impor