“China looks well positioned across the growth, policy, and inflation cycles in a global context in 2023,” Lau’s team wrote. “The prevailing market backdrop leads us to believe that the downside risk of maintaining underweight or shorting Chinese stocks is meaningfully higher than going long.”
Chinese stocks started the new year with a bang, with traders piling back into the market as the nation gradually emerges from stringent Covid restrictions and reopens its borders. Easing regulatory risks and support measures for the property sector lent an additional boost.
Goldman has been bullish on Chinese equities as a growing chorus of Wall Street banks pin their hopes on a brighter 2023 for the country’s battered shares. The MSCI China Index has climbed 48% from an October trough, outperforming global peers over the last two months.
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Yuan buying has also gained momentum in 2023 with robust stock inflows on reopening optimism. The offshore yuan advanced past 6.8 per dollar for the first time since August on Monday, extending its year-to-date rise to 1.9%.
Separately, the brokerage said it expects further earnings upside for the nation’s internet sector given a faster-than-expected reopening, macro recovery and normalizing of regulations. It added Alibaba Group Holding Ltd. to its conviction list and reiterated buy ratings on several other technology firms.
