UBS Wealth Management's Chief Investment Office has issued a note stating that opportunities in the Chinese market are expanding and becoming more balanced. The technology sector, particularly semiconductor equipment, remains a top pick, and the upcoming second-quarter earnings reports are expected to provide momentum for the revaluation of large internet companies.

The note observes that sector rotation in the Asian market is becoming increasingly evident. Previously underperforming markets, such as the MSCI China Index, have significantly outperformed other East Asian markets, and this trend of a broadening rally is expected to continue. Profitability across various industries is gradually stabilizing, the structural growth thesis for AI remains unchanged, and the localization process, along with demand from domestic hyperscale cloud service providers, continues to support the local hardware supply chain in China.

Upcoming financial reports are anticipated to provide clearer signals for the Chinese internet sector. Key areas of focus include whether cloud business growth is accelerating, the progress of AI monetization, and the trends in core business profit margins. Ongoing stock buybacks, potential spin-offs of AI assets, and a stabilizing regulatory environment should also contribute to the revaluation of the internet sector.

Beyond technology, the firm also favors the power and healthcare sectors. Amid market volatility, banks, insurance companies, select utilities, and the consumer staples sector are seen as offering defensive cash flows and income.