Goldman’s third China stock upgrade offers more upside for investors to savour as bull market arrives
- The Wall Street firm has raised its targets for the MSCI China Index twice this month, following a bump in November as China ended its zero-Covid policy
- The market reopens after a week-long Lunar holiday, during which stock benchmarks in Hong Kong and New York jumped by more than 2 per cent
The US investment bank raised its year-end target for the MSCI China Index to 85 from 80 in a report to clients on January 27, implying a 13 per cent upside from the current level. It also lifted its target for the CSI 300 Index of onshore stocks to 4,800 points from 4,500 for a 15 per cent potential gain.
The upgrade is the second this month, following a nudge in late November as China began to dismantle its zero-Covid policy to revive its floundering economy. That could fuel more fund inflows, allowing the market to catch up with a more than 2 per cent advance in prices elsewhere last week while the mainland bourses paused for the holiday.
“The ‘China reopening trade’ is better characterised as a ‘China growth recovery’” bet, strategists including Timothy Moe and Kinger Lau said in the report. “The current market rally is not just a consumer and services recovery trade, but a more broad-based growth rebound spanning a wide range of industries.”
The CSI 300 Index jumped 2 per cent to 4,267.63 as of 9.35am local time as trading resumed, taking stocks into a bull market as gains snowballed to more than 20 per cent from 3,508.70 on October 31 last year.
The MSCI China Index, which tracks 714 stocks listed at home and abroad worth US$2 trillion, could deliver a “still attractive” 16 per cent returns in US dollar terms in 2023 based on the higher target and bullish policy signals from Beijing, the report said.
The Hang Seng Index jumped 2.9 per cent last week as stock bulls invaded the Hong Kong market, pushing the benchmark to its best start to a year since 1984. The S&P 500 jumped 2.2 per cent while stocks in Asia outside Japan rose 1.6 per cent, according to Bloomberg data.