Goldman Sachs: "High Risk-Adjusted Returns"
As the Chinese stock market has shown weakness since the beginning of the year, global investment banks (IBs) have been issuing consecutive forecasts that the Chinese stock market could perform strongly this year.
According to Bloomberg on the 12th (local time), King Lau, a strategist at Goldman Sachs, stated in an investor memo the previous day that he still maintains an overweight view on both mainland China and overseas-listed Chinese stocks. Lau predicted, "With the (Trump) tariff policy becoming clearer, investor sentiment could improve from the end of the first quarter."
As a result of the Chinese government announcing consecutive economic stimulus measures since September last year, the CSI 300 Index, composed of the top 300 stocks by market capitalization on the Shanghai and Shenzhen stock exchanges, ended last year with a 14.7% gain, breaking a three-year consecutive decline. However, the CSI 300 Index has fallen more than 5% over seven trading days this year, marking the largest decline during this period since 2016.
Analysts attribute the Chinese stock market's weakness not only to China's economic slowdown but also to the Biden administration's successive regulatory actions against China since the new year. On the 6th, the Biden administration added major Chinese companies such as Tencent and CATL to the list of Chinese military-linked firms, causing their stock prices to plunge. On the 20th, Donald Trump, the President-elect of the United States, is set to impose high tariffs on China.
However, Goldman Sachs recommended buying Chinese stocks, citing their high risk-adjusted returns, and advised purchasing "government consumption-related stocks, emerging market exporters benefiting from a weaker yuan, and selected technology and infrastructure stocks." They also expanded their positive investment outlook on online retail, media, and healthcare stocks.
Earlier, British-based HSBC also expressed an optimistic stance on Hong Kong-listed Chinese stocks this year. HSBC raised its year-end target for the Hong Kong H-Share Index from 8610 to 8800, implying a 29% upside potential from current levels.
HSBC emphasized, "Policies to revitalize the tourism industry and the depressed local real estate sector, along with interest rate cuts, will support the Hong Kong stock market."
On the other hand, the U.S. S&P 500 Index, which rose 23% last year, faces warnings of entering a correction phase due to high U.S. Treasury yields. The yield on the 10-year U.S. Treasury note rose to 4.76% on the 10th, marking the highest level since April last year.
According to the Wall Street Journal (WSJ), asset management firm Janus Henderson predicted, "If the U.S. 10-year yield hits 5%, there will reflexively be a sell-off in stocks," and forecasted that "the S&P 500 Index could fall by 10%." The 10-year Treasury yield briefly surpassed 5% in October 2023.
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