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Goldman Sachs Boosts China Index Targets by 10% Amid Trade Easing

Market IntelThursday, May 15, 2025 4:04 am ET

1min read

Goldman Sachs has raised its 12-month target for the MSCI China Index and the Shanghai-Shenzhen 300 Index to 84 points and 4,600 points, respectively. This adjustment indicates a potential double-digit increase, bringing the targets back to levels seen before the so-called "liberation day" announced by former U.S. President Donald Trump on April 2, 2025. The investment bank continues to maintain an "overweight" rating on Chinese stocks, favoring sectors driven by domestic demand, including internet, services, banking, and real estate.

Goldman Sachs is closely monitoring sectors that benefit from domestic stimulus policies, as well as select investments related to artificial intelligence. The bank's strategic focus includes sectors expected to benefit from the recovery of domestic consumption and the acceleration of digital transformation. In the current policy easing cycle, high-quality regional banks and leading real estate companies are anticipated to see improvements in their valuations. Additionally, sectors such as construction materials, engineering machinery, and new energy vehicles are expected to maintain their growth momentum due to policy stimulus.

The bank also recommends investing in selected segments of the AI industry, including infrastructure for computing power and vertical application scenarios. Furthermore, Goldman Sachs suggests focusing on exporters to emerging markets, as well as state-owned enterprises with improving shareholder returns and consumer stocks with significant share buybacks.

This adjustment in targets comes after a period of easing in Sino-U.S. trade relations, with both countries issuing a joint statement on May 12, 2025, indicating a 90-day reduction in tariffs imposed since April 2, 2025. This move has led to a significant increase in container shipping bookings from China to the U.S., with a nearly 300% surge in orders following the tariff reductions. This trend is expected to continue as businesses rush to stockpile inventory ahead of potential further trade negotiations.

Goldman Sachs has been consistently bullish on Chinese assets throughout 2025. In February, the bank raised its 12-month target for the MSCI China Index to 85 points and for the Shanghai-Shenzhen 300 Index to 4,700 points. The bank highlighted the potential for a 15% to 20% increase in the fair value of Chinese stocks due to improved growth prospects and increased confidence, which could attract significant portfolio inflows. The bank also launched a China AI investment portfolio, emphasizing the global competitiveness and cost efficiency of models, which are reshaping the narrative around China's technology sector.

The bank's positive outlook on Chinese stocks is supported by the expectation of a 2.5% annual increase in earnings per share for Chinese companies over the next decade, driven by the widespread adoption of artificial intelligence. This, combined with the potential for significant portfolio inflows, underscores Goldman Sachs' continued optimism about the Chinese market.

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