Despite fears about China’s financial stability, UBS is positive on Chinese financials this year, its head of China strategy explained Tuesday.
“There’s less worry about financial stability in China because a lot of other sectors are doing well,” Gao Ting told CNBC on the sidelines of the UBS Greater China Conference.
Sectors dealing with over-capacity issues like steel and coal are doing “quite well” in China, Gao added, meaning there are fewer concerns about non-performing loans and the resulting shocks to financial stability.
“So financials will do well,” he said.
Steel prices have rallied in recent months due to tighter supply as Beijing restricts production in a bid to curb air pollution. On Monday, China issued stricter rules on building new steel production capacity to replace obsolete facilities, which may cut supply even further.
Coal prices have also been supported by gas shortages in China this winter. The market is also pricing in supply shortages for the future due to the government’s pollution clean-up, Gao added.