Goldie (NYSE:GS) Missed China Rally, Now Overweighting Chinese Stocks

Goldie (NYSE:GS) Missed China Rally, Now Overweighting Chinese Stocks

Goldie (NYSE:GS) Missed China Rally, Now Overweighting Chinese Stocks

$DIA, $SPY, $QQQ, $VXX

Goldman Sachs Group (NYSE:GS) is joining the rush on Chinese shares, becoming the latest major brokerage to upgrade the market thanks to mounting evidence of strength in the largest Asian economy.

The bank’s strategists are now overweight Chinese stocks, with their 12-month forecast for the MSCI China Index boosted to 73 points from 68, according to a note dated Monday from Goldman analysts in Hong Kong. That represents a gain of almost 25% for Y 2017.

The MSCI China gauge has already climbed 11% YTD, outpacing the wider Asian region and the 5.6% advance in global stocks.

Improving economic data have burnished the appeal of Chinese assets since Goldman lowered China to market-weight on 1 December.

Analysts anticipate that policy measures will continue to be supportive given the 2X-a-decade Communist Party conclave later this year, when a reshuffle among senior ranks is expected.

“Policy and growth dynamics should stay conducive leading up to the 19th Party Congress,” the analysts wrote.

Below are some other factors underpinning Goldman’s upgrade, as follows:

Earnings: The analysts have upgraded their forecasts twice in a month, with their outlook for EPS gains at 13% for this year and 11% for Y 2018.

Recent declines in both Hong Kong and mainland markets have provided a better entry level Goldman estimates there will be $54-B  of investment flows from mainland China into Hong Kong in Y 2017

Chinese banks and property stocks are seen extending gains, with Goldie lifting them to overweight and market-weight respectively. The firm is not so keen on defensive shares, including telecommunications, consumer staples and utilities, which were shifted to underweight

Goldman listed risks to their outlook that include a potentially more hawkish People’s Bank of China (PBoC), a possibility flagged by other investors as well.

The Fed’s tightening cycle may also weigh on the RMB Yuan’s exchange rate with the USD, as could the continuing overhang of a conflict over trade between the US and China.

Monday, the US major stock market indexes finished at: DJIA -21.50 at 20881.48, NAS Comp +14.06 at 5875.79, S&P 500 +0.87 at 2373.45

Volume: Trade on the NYSE came in below average with 900-M/shares exchanged.

  • NAS Comp +9.2% YTD
  • S&P 500 +6.0% YTD
  • DJIA +5.7% YTD
  • Russell 2000 +1.0% YTD
HeffX-LTN Analysis for DIA: Overall Short Intermediate Long
Bullish (0.42) Bullish (0.40) Bullish (0.35) Very Bullish (0.50)
HeffX-LTN Analysis for SPY: Overall Short Intermediate Long
Bullish (0.42) Bullish (0.38) Bullish (0.44) Bullish (0.46)
HeffX-LTN Analysis for QQQ: Overall Short Intermediate Long
Bullish (0.45) Bullish (0.44) Very Bullish (0.50) Bullish (0.42)
HeffX-LTN Analysis for VXX: Overall Short Intermediate Long
Bearish (-0.45) Bearish (-0.46) Bearish (-0.40) Very Bearish (-0.50)

Stay tuned…

 

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Paul Ebeling

Paul A. Ebeling, polymath, excels in diverse fields of knowledge. Pattern Recognition Analyst in Equities, Commodities and Foreign Exchange and author of “The Red Roadmaster’s Technical Report” on the US Major Market Indices™, a highly regarded, weekly financial market letter, he is also a philosopher, issuing insights on a wide range of subjects to a following of over 250,000 cohorts. An international audience of opinion makers, business leaders, and global organizations recognizes Ebeling as an expert.

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