Goldman Sachs optimistic about Chinese equities, introduces 40-stock China Recovery Portfolio

From Yahoo Finance: 2024-05-21 11:32:42

Goldman Sachs is more optimistic about Chinese equities, raising price targets on domestic indexes and introducing a 40-stock China Recovery Portfolio. Chinese stocks have seen a substantial rally with the MSCI China Index rising 31% from its lows in late January and 19% in the past month, outperforming many other equity indices. Goldman Sachs analysts predict a 60% chance of further stock market growth, with potential maximum returns averaging 35% over the next six months.

China has shown signs of improvement, with lower property-related risks and macroeconomic performance exceeding expectations. The Chinese government has implemented measures to stimulate the property sector, including reducing down payment ratios to record lows and setting up a relending facility to support the purchase of unsold housing for social housing conversions.

There is a ‘fear of missing out’ effect driving the market, with global investors showing interest in closing underweight positions or increasing exposure to Chinese stocks. While concerns about potential disappointments in domestic policies and U.S.-China tensions exist, Chinese equities have become less reactive to these risks, maintaining strong market momentum.

Goldman Sachs offers a diversified portfolio of 40 Chinese stocks, including Tencent Holding Ltd., Alibaba Group Holdings Ltd., Meituan, BYD Co. Ltd, Li Auto Inc., and Trip.com. Analysts project different potential upsides based on bull, base, and bear cases, with favorable risk/reward ratios despite potential U.S.-China conflicts. The market remains resilient despite recent tariffs imposed by the Biden administration.



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