Reuters: Goldman doubling Japanese real estate investments – Time to buy?

By: Motiur Rahman
Motiur Rahman
Md Motiur enjoys researching how companies are solving challenges the world will face over the coming decades. In his… read more.
on Jun 2, 2021
  • Goldman Sachs shares surged 2.80% from Friday’s close to top $382.44.
  • This came after Reuters said the company was doubling real estate investments in Japan.
  • GS stock price has more than doubled since October 30 last year. Is it too late to buy?

Goldman Sachs Group Inc. (NYSE:GS) shares surged 2.80% on Tuesday after Reuters said that the company was planning to double its annual real estate investments in Japan on Monday. GS shares are now up more than 100% over the last seven months and 176% since bottoming in March last year.

Goldman Sachs’ long-term outlook is exciting

Goldman Sachs has been expanding its wealth management empire to Asia’s largest economies. Last month, the investment bank gained approval from the Chinese government to run a joint asset management venture with the Industrial & Commercial Bank of China Ltd (ICBC) in the country. Goldman will own 51% of the venture, while ICBC will hold the remaining 49%.

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This February, Bloomberg reported that Goldman was planning to enter the wealth management business in Japan. The company was reported to be targeting $9 billion (£6.36 billion) ~JPY 990 billion in assets under management within the next 5-10 years in the far east Asian country. And on Monday, Reuters said, Goldman was now planning to double its annual real estate investments to JPY 250 billion ~$2.3 billion (£1.63 billion).

One of the driving forces behind the intensive investment in the Asian market is low interest rates. Japan’s short-term interest rates are currently at -0.1%, while the target for the 10-year Japanese government bond is about 0%. China’s base interest rate has fallen to 3.85%, down from 4.35% in 2019. 

These rates will rise when the world returns to normalcy. The current rates and the prospect of higher rates in the future are perfect for income investments. Banks can borrow and invest at the current low rates, then watch their incomes grow with rising interest rates.

Shares of the company trade a trailing P/E ratio of just 9.51, which is compelling to value investors. Long-term earnings growth is also an exciting factor, with the stock trading at a PEG ratio of 0.46.

Source – TradingView

Technical overview

Technically, Goldman Sachs shares appear to be on a bull-run that stretches back seven months. The stock has already hit overbought levels in the 14-hour RSI, which could trigger a short-term pullback. However, the long-term outlook remains exciting based on the valuation multiples.

Investors can target profits at around $400.92 and $420.47. Short-term pullback profits for those looking to short the stock can be targeted at the key support levels at $359.85 and $340.30.

Bottom line: Goldman stock is an exciting long-term buy

In summary, shares of GS stock appear to have surged to overbought levels. This suggests that a short-term pullback could be imminent. However, when you look at the long-term investment opportunity, there is a lot of room left to run for Goldman Sachs shares.

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