Goldman strategists expect 24% jump in Chinese stocks by year-end
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Goldman Sachs see potential for the MSCI China Index to reach 85 by the end of 2023.
PHOTO: REUTERS
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MELBOURNE - Goldman Sachs Group strategists expect the sell-off in Chinese stocks since late January to reverse as the nation’s economic reopening delivers windfall profits for businesses.
Goldman Sachs sees potential for the MSCI China Index to reach 85 by the end of 2023, an increase of about 24 per cent from current levels, according to a note on Monday from strategists including Kinger Lau.
China’s reopening rally has lost momentum amid escalating geopolitical tensions and an uncertain outlook for the economy, with a gauge of Chinese stocks trading in Hong Kong falling into a technical correction last week.
While that has spurred a debate on whether the rally has run its course, bulls are betting on a key political meeting due in March and upcoming earnings to bring fresh impetus.
“The principal theme in the stock market will gradually shift from reopening to recovery, with the driver of the potential gains likely rotating from multiple expansion to earnings growth/delivery,” the strategists said.
“The growth impulse should be heavily tilted towards the consumer economy, where the service sector is still operating significantly below the 2019 pre-pandemic levels,” they added.
Chinese stocks climbed on Monday after three weekly declines. The Hang Seng China gauge advanced as much as 0.5 per cent, while the onshore CSI 300 benchmark rose 1 per cent.
The modest gains suggest cautious sentiment in the wake of negative development over the weekend, when a meeting between United States Secretary of State Antony Blinken and China’s top diplomat Wang Yi
Some market watchers expect the next leg of China’s reopening trade to be a slow grind as investors turn their attention to fundamentals.
“Investors would likely require concrete evidence to confirm that fundamentals are indeed improving as the cycle transitions into growth,” the Goldman strategists wrote.
As such, January-February macro statistics, the Two Sessions, and quarterly earnings from Chinese companies will be important factors to watch, they added. BLOOMBERG
