China, often the laggard in recent global rallies also benefit, which is a rare tailwind for a market otherwise short on catalysts.

Fed’s first rate cut since December didn’t draw reaction from U.S. equities. But Chinese markets have a stronger historical linkage to easier U.S. policy.

UBS analysts said that in the six months following the first U.S. rate cut of the past three easing cycles, 2007, 2019 and 2024, the MSCI China index returned an average 11%, outperforming EM and global markets by 7 and 13 percentage points, respectively.

Offshore listings such as New York-listed ADRs and Hong Kong H-shares typically outperformed domestically traded A-shares.

If history repeats, China’s tech-heavy segments could benefit most. Previous easing phases saw data centres, internet platforms and semiconductor stocks rally by more than 25% relative to the market.

Cyclical and defensive names in energy producers, power utilities, transport operators have lagged. Oddly, high-beta sectors like autos, insurance and property also underperformed, suggesting that rate relief alone doesn’t fix structurally broken business models.

There are caveats though as the current Fed cycle is unfolding against unusually weak sentiment toward China.

Foreign positioning remains light for good reason given the country has patchy growth, murky policy signals and no clear catalyst beyond valuation appeal.

UBS itself still prefers onshore A-shares this time, betting that local retail inflows will outweigh foreign flows into ADRs.

Still, macro momentum may at least stop working against Beijing. UBS expects further U.S. cuts in October and December totalling 75 basis points, alongside a weaker dollar that could push USDCNY to 7.10 by year-end. That eases pressure on China’s currency, funding costs and capital outflows.

Investors may not need to believe in a China recovery. They may simply need to believe that things stop getting worse. For a market priced at a 30% discount to developed peers, that alone could be enough for a short reprieve.