Investing.com - Banks, insurance, and consumer durables are currently the most overweight Chinese sectors in a model designed by UBS that aims to forecast industry rotations in the country.

The most underweight sectors were semiconductors, capital goods and materials, the analysts led by Cathy Fang said in a note to clients.

"The model screens sectors with good fundamental profiles and that have high exposure to domestic media and retail
investors, and where institutional investors are overweight and increasing weight," the analysts noted.

UBS’s report comes as the MSCI China index, a benchmark of 580 Chinese stocks, ended the first quarter up by 16%, reflecting a recent flight away from U.S. stocks to overseas options.

Investors have been hopeful that local officials in China will roll out more stimulus measures to bolster an economy that is facing renewed U.S. tariff pressure, sluggish consumer spending activity, and an ailing property market.

Technology firms have been among the most sought after in China, fueled by a rush of interest in the domestic development of artificial intelligence. Underlying the trend was the emergence earlier this year of Chinese start-up DeepSeek, which launched an AI model that displayed similar performance to U.S. rivals like OpenAI’s ChatGPT at a fraction of the cost.

Chinese President Xi Jinping even held a rare meeting with local tech leaders, urging them to "show their talent" as they move to build out the country’s AI capabilities.

E-commerce giant Alibaba (NYSE: BABA ) Group has spiked by nearly 60% so far this year, while Shenzhen-headquartered conglomerate Tencent has surged by more than 21%. The Hang Seng Tech Index has subsequently become one of the best performing benchmarks in 2025.

A buying spree in Hong Kong was also spurred on by blockbuster initial public offerings, including the debut of Chinese bubble tea chain Mixue that raised $444 million from the sale of 17 million shares.

(Reuters contributed reporting.)