Goldman Sachs Predicts 13% Earnings Growth for China's 'Prominent 10'

Goldman Sachs has recently adopted a bullish stance on ten China-based companies, suggesting that these firms could be the country's answer to the 'Magnificent 7' in the United States. The 'Magnificent 7' in the US includes tech giants such as Tesla, Meta, Alphabet, Amazon, Apple, Microsoft, and Nvidia, which have set a high standard for market dominance and technological innovation. Goldman Sachs' analysts believe that a similar group of companies in China could achieve comparable success.

The 'Prominent 10' identified by Goldman Sachs are large, public-owned enterprises (POEs) that embody themes of AI/Tech development, self-sufficiency, 'Going Global,' services, and new forms of consumption. These companies are seen as having the potential to lead in various sectors, much like their counterparts in the United States. The bank's bullish outlook is based on several factors, including the companies' strong financial performance, innovative capabilities, and strategic positioning within their respective industries. The companies include the gaming and multimedia giant Tencent, e-commerce firm Alibaba, smartphone maker Xiaomi, EV maker BYD, shopping platform Meituan, online gaming firm NetEase, home appliance maker Midea, pharmaceutical company Hengrui, online travel agency Trip.com and sports equipment company ANTA.

Goldman Sachs' analysts predict that a favorable regulatory environment and artificial intelligence investments may boost the earnings of these ten POEs by 13% in each of the next two years. The bank's analysis suggests that AI will play a crucial role in the success of these companies, as they leverage advanced technologies to enhance their products and services. The bank's report also highlights the importance of the Chinese equity market’s relative segmentation and modest valuations, as well as the Chinese government’s recent move to increase support for the private economy and updated regulations to make mergers and acquisitions easier. These factors are expected to revitalize POEs’ investment appetite, thereby supporting their organic and acquisitive growth down the road.

The bullish outlook on these ten stocks comes at a time when the Chinese market is undergoing significant changes. The country's economic reforms and technological advancements are creating new opportunities for growth and innovation. Goldman Sachs' analysis suggests that these companies are well-positioned to capitalize on these opportunities, driving significant growth and innovation in the coming years. The bank's report highlights the potential of these companies to become China's 'Magnificent 7', leading the way in various sectors and driving the country's economic growth.