Goldman Sachs leads bullish chorus on Chinese stocks, as Morgan Stanley and JPMorgan’s private bank remain cautious
- ‘It’s too early to leave the party,’ says an HSBC analyst as Goldman raises its index targets by at least 5 per cent
- JPMorgan Private Bank calls an end to the rebound and advises investors to sell Chinese stocks, particularly offshore shares
A spectacular run in Chinese stocks has divided global investment banks into two camps, with Goldman Sachs, UBS Group and HSBC Holdings firmly in the bullish camp while Morgan Stanley and JPMorgan Chase’s private-banking unit remain cautious.
Goldman has raised its targets for both the MSCI China Index and the CSI 300 Index by at least 5 per cent this week to reflect diminished tail risks and earnings optimism. UBS and HSBC also expect continued gains, arguing that the rally will be underpinned by policy support and depressed valuations.
On the flip side, Morgan Stanley said that earnings growth for Chinese companies will be disappointing this year and next, and JPMorgan Private Bank is even more pessimistic, believing that the liquidity-driven rise has largely run its course amid a lack of fundamental economic improvement.
The MSCI China Index, the benchmark widely used by overseas investors, has risen 32 per cent from a January low, and the Hang Seng Index has climbed 28 per cent in the same span, both surpassing the 20 per cent gain defined as a bull market.
Historical data favours a continuing rise, according to Goldman. Examples over the past two decades show that there is a 60 per cent probability that stocks will extend gains after entering a bull market, fetching an average peak of 35 per cent in the following six months, it said.
