Goldman Sachs: China's stock market is slowly growing, and key indices are expected to rise by about 30% by the end of 2027

The Zhitong Finance App learned that Goldman Sachs said that the Chinese stock market will enter a more protracted upward phase. It is expected that key indices will have room to rise by about 30% by the end of 2027, mainly driven by 12% profit trend growth and 5%-10% potential for further revaluation. As the bull market unfolds, macro risks may still trigger a phased correction, but the dominant mentality should shift from “reducing positions on high” to “buying on dips.” The focus is on investment themes such as “China's Top 10” (Chinese Top 10), artificial intelligence, global leaders, and anti-domestic market beneficiaries.

Analysts Kinger Lau and others pointed out in the report that the reasons for the protracted bull market include the combination of demand-side stimulus and the new five-year plan to help rebalance growth and mitigate internal risks; artificial intelligence is reshaping the profit pattern, and AI capital expenditure boosts profits; Chinese stocks still have deep discounts compared to global stock markets, and the potential scale of capital for Chinese asset reallocation could reach trillions of dollars.

Recently, Goldman Sachs has released several reports that are optimistic about the Chinese market. On September 18, Goldman Sachs released a research report stating that it maintains overrated ratings for A shares and H shares, suggests absorption at low prices, and is optimistic about investment themes such as leading private enterprises, artificial intelligence, anti-domestic investment, and shareholder returns. Analyst Kinger Lau and others pointed out in the report that profit is necessary for the stock market to continue, but liquidity is also a necessary condition. Currently, the “slow bull” pattern of A-shares seems to be more stable than before.

On October 19, Goldman Sachs China stock strategy analysts Fu Si and a team of analysts led by Liu Jinjin released a report entitled “China's Strategy: Going Global”.

Goldman Sachs analysts said in the report that investors should pay attention to Chinese listed companies seeking to increase overseas revenue, because the RMB exchange rate is still competitive, China already dominates the global supply chain, and Chinese products are competitive in cost and quality on a global scale. These factors will all support the global expansion of these leading Chinese companies.

According to a recent research report released by Goldman Sachs Research's stock strategy analysis team, China's exports have evolved further. “The view that Chinese exporters only provide low-cost, low-value-added industrial products to consumers in developed markets is out of date. China is increasingly using emerging markets as final export destinations, gaining a larger share in the global high-end manufacturing sector, and exporting services, intellectual property rights, and culture to the world.”

The team mentioned that the share of overseas revenue of listed Chinese companies has increased from 14% in 2018 to 16% now (compared to the average share of developed market and emerging market companies is 53% and 48%, respectively). This is mainly driven by the automotive, retail, and capital goods industries, and its global revenue share is also growing at a rate of 0.4 percentage points per year.

Goldman Sachs estimates that among the MSCI China Index's constituent companies, about 15% of sales currently come from overseas. This ratio is already higher than 11% in 2018. Among them, the growth in the automotive, retail, and capital goods businesses is particularly prominent. By 2028, this percentage could rise to around 19%.