(Bloomberg) — Goldman Sachs Group Inc. strategists expect the selloff in Chinese stocks since late January to reverse as the nation’s economic reopening delivers windfall profits for businesses.
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The US investment bank sees potential for the MSCI China Index to reach 85 points by the end of 2023, an increase of about 24% over its close last week, according to a note from strategists including Kinger Lau. The gauge climbed as much as 1.6% in Monday’s session amid a broad China rebound.
The bullish Goldman forecast comes as investors have been debating whether the reopening-fueled China stock rally that began in November has run its course. Escalating geopolitical tensions and an uncertain outlook for the economic recovery have sparked losses in February after a three-month surge, though China bulls say a key political meeting due next month as well as upcoming earnings will 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 wrote. “The growth impulse should be heavily tilted towards the consumer economy, where services sector is still operating significantly below the 2019 pre-pandemic levels,” they added.
Chinese equity gauges were the best performers in Asia on Monday. The CSI 300 Index jumped as much as 2.5% after three weeks of losses. Construction-related shares were among the biggest boosts to the onshore benchmark, alongside telecommunication stocks.
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A gauge of China stocks in Hong Kong advanced more than 1.5% after entering a technical correction last week. Shares of property developers rallied after the nation moved away from rules restricting land sales by local governments in its latest effort to revive the housing market.
Expectations have been rising that the government will announce more pro-growth policies as the National People’s Congress takes place…