UBS upgrades India amid tariff wars across globe but still prefers China over India
By Markets Desk Published on April 24, 2025, 06:52 IST
UBS has tactically realigned its emerging markets (EM) and Asia Pacific (APAC) equity strategy, citing increased global trade uncertainty and shifting capital flows. The global brokerage now upgrades Indonesia to 'Overweight' while moving India to a 'Neutral' stance, preferring defensive and domestic-focused markets over export-reliant economies. Why the shift?
UBS believes EM equities may only outperform the S&P 500 in a 'no tariff' scenario, given that over 35% of the MSCI EM revenue comes from exports—with 13% of that to the US. The firm warns this exposure may be vulnerable amid rising tariff rhetoric and geopolitical shifts.
UBS's new market framework prioritizes: Resilience to GDP slowdowns
Domestic consumption-led growth
Defensive sectors
Benefit from lower oil prices
Bottom-up analyst conviction India: ticks many boxes, but valuation still a concern
While India meets several criteria—strong domestic focus, resilience to global GDP shocks, and oil price tailwinds—UBS believes stock fundamentals remain weak, and valuations are still above historical averages. The firm also highlighted lingering uncertainty around policy focus and India's positioning in global supply chains.
India is now rated 'Neutral', with UBS continuing to prefer China within the EM basket due to its lower valuation, stronger stimulus potential, and more favorable risk-reward profile. Indonesia: top EM bet
UBS upgrades Indonesia to 'Overweight', citing its domestic resilience and defensive economic structure. Valuations are now back near Covid lows, and the country's national leadership team post-elections is seen as supportive for growth. UBS views Indonesia as a strong beneficiary of ASEAN trade flows and relatively insulated from US-China friction. Other changes: South Africa has been moved to 'Neutral' , despite strong post-election returns.
Hong Kong is also downgraded to 'Neutral', given its high exposure to global and US trade flows, and a preference for yield which UBS sees as risky amid high index volatility.
Markets Desk at BusinessUpturn.com
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