--- title: "UBS Securities Meng Lei: Optimistic about the valuation recovery of industries that have seen significant declines this round, optimistic about the \"cyclical\" style related to industrial enterprise profits, optimistic about excellent Chinese companies going abroad, and optimistic about the style benefiting from marginal net capital inflows under a \"slow bull\" pattern" type: "News" locale: "en" url: "https://longbridge.com/en/news/282377450.md" description: "UBS Securities China equity strategy analyst Meng Lei proposed four strategies to cope with market risk appetite: 1. Favor industries with significant valuation corrections; 2. Favor the \"cyclical\" style related to industrial enterprise profits, expecting accelerated profit growth in A-share industrial-related sectors; 3. Favor outstanding Chinese companies going abroad, as their valuations are expected to recover despite facing geopolitical risks; 4. Focus on styles benefiting from marginal net capital inflows under a \"slow bull\" pattern" datetime: "2026-04-10T02:39:12.000Z" locales: - [zh-CN](https://longbridge.com/zh-CN/news/282377450.md) - [en](https://longbridge.com/en/news/282377450.md) - [zh-HK](https://longbridge.com/zh-HK/news/282377450.md) --- # UBS Securities Meng Lei: Optimistic about the valuation recovery of industries that have seen significant declines this round, optimistic about the "cyclical" style related to industrial enterprise profits, optimistic about excellent Chinese companies going abroad, and optimistic about the style benefiting from marginal net capital inflows under a "slow bull" pattern UBS Securities China stock strategy analyst Meng Lei published a China stock strategy, and the following are the main points: Four strategies to cope with the recovery of market risk appetite **Strategy #1: Optimistic about the valuation recovery of industries that have fallen significantly this round** Previously, we pointed out that the "de-risking" of the A-share market may be nearing its end in the short term, and market valuations are expected to recover in the medium term. Against the backdrop of easing geopolitical risks in the Middle East and the recovery of market risk appetite in the short term, we believe that industries that have fallen significantly due to market sentiment disturbances since March, and whose fundamentals have not been significantly affected, are likely to welcome opportunities for valuation recovery. **Strategy #2: Optimistic about the "cyclical" style related to industrial enterprise profits** In February 2026, China's PPI year-on-year decline further narrowed to -0.9%. Meanwhile, in the first two months of 2026, the year-on-year growth rate of profits for large-scale industrial enterprises in China reached 15.2%. This indicates that the profit growth of A-share industrial-related industries has begun to accelerate before this round of geopolitical conflicts. At the same time, since March, the market's consensus expectation for the profit growth rate of the CSI 300 Index in 2026 has been further raised. Its trend is similar to years when profits were continuously revised upward historically (2017, 2019, and 2021). Among them, the information technology and materials sectors have seen the largest upward revisions in profits. In addition, with the continuous advancement of "anti-involution," the profit margins of related A-share industries are expected to improve. **Strategy #3: Optimistic about excellent Chinese companies going overseas** Previously, market participants were concerned that the appreciation of the RMB and global geopolitical risks would negatively impact Chinese companies' overseas expansion and export businesses. Against the backdrop of market sentiment recovery, the alleviation of these concerns is expected to drive the valuation recovery of related companies. In addition, we note that from the beginning of 2026 to the present, China's export growth has remained strong, with the cumulative year-on-year growth of China's export value (in USD) reaching 21.8% in the first two months of this year. In the long term, although geopolitical conflicts have increased the difficulty of going overseas, some excellent Chinese companies are seizing the opportunity to transform and upgrade, enhancing their global competitiveness. In fact, the overseas business revenue share of the non-financial sector in A-shares was 15.8%, 15.1%, and 16.7% in 2022, 2023, and 2024, respectively. Therefore, increasing the proportion of overseas revenue should drive the improvement of gross margins for A-share companies and enhance their profitability. **Strategy #4: Optimistic about styles benefiting from marginal capital net inflows under a "slow bull" pattern** The style and industry preferences of marginal capital usually determine the overall operating style of the A-share market. We believe that ETFs, leveraged funds, private equity funds, and insurance funds will be the most important sources of incremental capital in the next phase of the A-share market. In the short term, "growth" and "small-cap" styles may benefit the most from the pursuit of short-term funds. In the medium term, the further expansion of industry ETF scales is conducive to the stock price performance of leading companies in the industry, thereby constraining the space for small-cap styles to significantly outperform. The financing balance has not significantly decreased in proportion during the recent market correction, indicating that leveraged funds hold an optimistic attitude towards the subsequent market trends. In addition, the further increase in the scale of new private equity issuances is expected to provide continuous support for the growth style The continuous entry of insurance funds into the market, as a slow variable, has a relatively low impact on short-term stock prices. 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