Goldman Sachs has bet on Chinese stocks rising 30% in two years. What will make it happen?

Bank Goldman Sachs, one of the largest on Wall Street, said that the key stock index of China will grow by 30% by the end of 2027 due to government support, growth in corporate profits and strong capital inflows. According to the bank's analysts, the Chinese stock market is close to transitioning from a recovery rebound based on hopes and speculation to sustainable growth with moderate volatility.

"We now expect a more sustained uptrend in Chinese equities," Bloomberg quoted a Goldman Sachs analyst team forecast published Oct. 22. According to them, the equity rally in the Chinese market is no longer speculative and highly volatile and is ready to move "from hope to growth" - from a recovery phase to a fundamentals-based uptrend.

Among the factors that could support Chinese securities, Goldman Sachs named additional demand stimulus, growth in corporate profits - including through the introduction of artificial intelligence technologies - and a steady inflow of both domestic and foreign capital. The bank estimates that corporate profits could increase by 12% over the next three years and equity multiples could rise by 5-10% from current levels.

In July, Goldman Sachs raised its 12-month target for the MSCI China index from 85 to 90 points, noting the improving prospects for a trade deal between the U.S. and China. In September, the bank urged clients to take a "buy on drawdown" approach, citing low valuations of Chinese stocks and the potential for money to flow into the Chinese stock market from two main groups of investors: individuals and large financial institutions.

MSCI China rose above 90 points in early October, but then corrected to 87 points. On track for its first monthly decline in six months after a rally on the artificial intelligence theme began to run out of steam. Investors are keeping a close eye on this week's Fourth Plenum of the Central Committee of the Communist Party of China, where the country's leadership is discussing the 15th Five-Year Plan (for 2026-2030), and waiting for U.S. President Donald Trump to meet with Chinese President Xi Jinping at a summit in South Korea in late October, Bloomberg added.

This article was AI-translated and verified by a human editor