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<Research>G Sachs: CN Stock Mkt Brooding 'Slow Bull'; Key Indices Expected to Rise ~30% by End-2027
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Goldman Sachs released a strategy report on the Chinese market, indicating that a “slow bull market” is brooding. The MSCI China Index has bounced back 80% from the cyclical low at the end of 2022, experiencing four stark corrections during this period. The broker expected the Chinese stock market to enter a more sustained uptrend, with key indices anticipated to leap by about 30% by the end of 2027. The driving factors include a profit CAGR of 12% and 5-10% multiple expansion upside. A favorable policy environment is unfolding in the broker’s view: (1) A “policy bottom” was triggered a year ago, effectively compressing extreme downside risks; (2) Demand-side stimulus policies, in conjunction with the new five-year plan, help rebalance economic growth and mitigate external risks; (3) The “Nine Initiatives” were released, improving shareholder return mechanisms; (4) Easing industry regulations are promoting the return and rise of Chinese listed private enterprises. Growth momentum is also reaccelerating: (1) AI altered the earnings landscape, with profit enhancement from AI capex underway; (2) “Anti-involution” policies rekindle hopes for corporate profit recovery; (3) The “Going Global” strategy showcases China's increasing global competitiveness, overall pushing EPS growth to low-teen territory. Although macro risks in China will still trigger market corrections, investors' mindset should shift from “sell/fade the rally” to “buy the dip”. In a bull market, the performance of individual stocks will inevitably diverge, so the broker advocated a strategy focused on pursuing excess returns, emphasizing “Chinese Prominent 10”, “China AI theme”, “Going Global Leaders”, “Anti-Involution Beneficiaries”, and A-share small caps in the Growth bucket, balanced by enticing cash yields from Shareholder Returns Portfolio of the broker. AASTOCKS Financial News Website: www.aastocks.com |
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