①A team of analysts led by Kinger Lau, Goldman Sachs’ chief China equity strategist, projected on Monday that the bull market for Chinese stocks will continue into next year; ②Goldman Sachs analysts also reiterated that the Chinese stock market could rise by 38% by 2027; ③Goldman Sachs accurately predicted this year’s rally in the Chinese stock market.
Driven by investors reassessing the value of China's technology sector and favorable factors such as household savings flowing into the stock market, Chinese equities have strongly rebounded this year. Goldman Sachs' latest forecast indicates that Chinese stocks are expected to continue their upward trend through 2026.
“We expect the (Chinese stock) bull market to continue, but the pace of increase will slow down somewhat,” a team of analysts led by Kinger Lau, Goldman Sachs’ chief China equity strategist, stated in a report released on Monday.
Goldman Sachs analysts believe that China’s equity market cycle is transitioning from being ‘expectation-driven’ to ‘earnings-driven.’ In this phase, profit realization and moderate valuation expansion will become the core drivers of returns. The report pointed out that corporate earnings in China could grow by 14% next year and may continue to grow by 12% in 2027, while valuation expansion could be around 10%.
Goldman Sachs analysts reiterated that the Chinese stock market could rise by another 38% by the end of 2027.
The bank also noted that overseas revenue growth for listed companies is expected to drive annual earnings increases of approximately 1.5% for MSCI China Index constituents by 2030. The valuation of China’s AI tech ecosystem has been reassessed, but considering the potential growth space for capital expenditure in China and the emphasis placed on AI commercialization, it still appears cheap compared to the United States.
Last month, Kinger Lau stated that the AI-led rally in Chinese stocks was far from a bubble, as Chinese technology companies still have room to enhance valuations and profitability by focusing on AI applications. During an interview, he noted that unlike the U.S., which focuses on computing power strategy, China has allocated more funding to artificial intelligence application fields, giving investors “reason to believe that, at least in the short term, China’s AI commercialization potential might be stronger.”
Goldman Sachs accurately predicted this year’s rally in the Chinese stock market. At the end of last year, the bank forecast that major Chinese indices could rise by at least 13% by 2025, benefiting from policy support for the economy and capital markets, a recovery in corporate earnings growth, and valuation expansion.
The actual situation is: $CSI 300 Index (000300.SH)$ ——one of the most representative indices of China’s A-share market——has risen more than 17% year-to-date, while $Hang Seng Index (800000.HK)$ ——the most representative index of Hong Kong's stock market——has surged nearly 30%.
Earlier this year, DeepSeek, a Chinese artificial intelligence startup, suddenly rose to prominence, prompting the market to reassess the value of a range of Chinese tech stocks from $BABA-W (09988.HK)$To$TENCENT (00700.HK)$The value of a number of Chinese tech stocks has triggered a sharp decline in American tech stocks.
Against the backdrop of declining bank deposit rates, Chinese households have redirected a portion of their massive savings into the stock market in pursuit of higher returns, further fueling the current rally.
In addition to Goldman Sachs, other leading international banks such as Morgan Stanley, JPMorgan, and UBS Group have recently expressed bullish views on the Chinese stock market, with particularly strong optimism toward the technology sector.
Liu Mingdi, Head of China and Hong Kong Equity Strategy Research at JPMorgan, stated in a recent interview that China’s economy and stock market are currently in a 'summer' cycle. Despite potential short-term corrections, a 'spring sprint' is expected by 2026, likely reigniting interest in growth stocks.
Based on JPMorgan's quantitative macro indicators, Liu Mingdi divides the market cycle into four phases: recovery (spring), expansion (summer), deceleration (autumn), and contraction (winter).
Editor/Doris