Goldman Sachs Anticipates 24% Surge in Chinese Stocks in 2023 as Covid Moves into “Rear View Mirror”

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Analysts from Goldman Sachs expect China’s post-Covid reopening to drive an economic recovery that will provide a vigorous boost to the country’s listed concerns

The MSCI China index could rise by as much as 24% following the roll back of Covid restrictions, Goldman analysts said in a Monday note.

“We believe 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,” Goldman Sachs analysts said in a note co-authored by chief China equity strategist Kinger Lau.

The note said that China’s Covid restrictions are now “arguably in the rear view mirror,” and that the Chinese stock market’s performance will be “reminiscent of a transition from the Hope to Growth phase in a typical equity cycle.”

Goldman sees China’s economy growing 5.5% full-year 2023, with second and third-quarter growth see to surge to 9% and 7% respectively.

Analysts from Goldman also expect consumption to recover, given more than 3 trillion yuan in excess savings held by Chinese households.

“The growth impulse should be heavily tilted towards the consumer economy, where services sector is still operating significantly below the 2019 pre-pandemic levels,” the Note said.

Speculative money is also showing greater enthusiasm for China’s capital markets according to data from Goldman’s prime brokerage.

“Hedge fund investors have substantially re-risked in Chinese stocks, predominantly in Offshore equities per GS Prime Brokerage, with their net exposures in China relative to their total equity exposures globally almost reverting to all-time highs.”