Chinese stocks will gain in 2024: Goldman Sachs

2023 is on course to mark the third straight annual loss for Chinese equities but a Goldman Sachs strategist is convinced that next year will be a different one.

Goldman Sachs’ view on Chinese equities

Kinger Lau forecasts a 12% gain for MSCI China and an even bigger 15% gain for CSI 300 in 2024 as earnings grow an estimated 10%. His outlook report for next year also reads:

An arguably bearish policy and/or geopolitical outlook is embedded in the suppressed valuations, pointing to a right-skewed return distribution if these concerns subside.

A moderate increase in valuations could help the Chinese stocks in 2024 as well, Lau added.

He’s positive on the onshore Chinese markets but recommends avoiding the region’s banks, real estate, and consumer services stocks.

Chinese stocks that are particularly attractive

Among sectors that he likes is tech hardware. He sees opportunity in artificial intelligence and new infrastructure as well for investors interest in gaining exposure to Chinese stocks.

Kinger Lau is also bullish on sectors that are key to the Beijing’s national development goals which include new energy vehicles, batteries, and renewable energy.

Also this week, analysts at Jefferies said Chinese tech giants like Alibaba Group Holding Ltd and Baidu Inc had significant hidden value.

China by far has the best FCF cover in Asia with a high net cash proportion of companies, indicating significant potential to boost shareholder returns.