Goldman Predicts China's Stock Market and Yuan Will Continue to Rise Due to Policy Changes

The investment bank said the Chinese economy is on track for a strong recovery, which could lead to further gains in the stock market and a stronger currency.

January 9, 2023

4 minutes

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Goldman Sachs Group Inc. said Chinese stocks may rally another 15%, while the yuan is seen hitting levels last seen in April on the nation’s reopening and several key policy shifts. The investment bank said the Chinese economy is on track for a strong recovery, which could lead to further gains in the stock market and a stronger currency.

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The brokerage has raised its 12-month index target for the MSCI China Index to 80 from 70, citing low valuations and multiple policy pivots in areas like housing, internet regulation and geopolitics, strategists say. In a separate note, Goldman says it sees the yuan rallying to 6.5 per dollar by year-end, up from its previous estimate of 6.9, on reopening optimism.

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According to Lau's team, China appears to be in a strong position in terms of growth, policy, and inflation in 2023. They believe that the current market conditions make it more risky to bet against Chinese stocks than to invest in them.

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Chinese stocks started the new year on a strong note, with traders returning to the market as the country gradually emerges from strict Covid restrictions and reopens its borders. Easing regulatory risks and support measures for the property sector provided an additional boost.

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Goldman Sachs has been bullish on Chinese equities, with a growing number of Wall Street banks pinning 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 on Monday, extending its year-to-date rise to 1.9%.

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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.