Goldman upgrades call on Chinese stock on positive impact of stimulus blitz | World News

By John Cheng

Goldman Sachs Group Inc. upgraded its call on Chinese stocks to overweight, as it joined a camp of optimists that are touting the positive impact of Beijing’s stimulus blitz.

Gauges tracking the nation’s equities may rise another 15 per cent-20 per cent if authorities deliver on policy measures, strategists including Tim Moe wrote in a note dated Oct. 5. Valuations are still below the historical average, earnings may improve and global investors’ positioning remains light, they added.

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The recent stimulus announcements “have led the market to believe that policy makers have become more concerned about taking sufficient action to curtail left-tail growth risk,” the strategists wrote. 

Beijing’s stimulus bonanza has sparked a flurry of upgrades by Wall Street heavyweights including HSBC Holdings Plc and BlackRock Inc. as expectations grow that the once-beaten down stock market has finally turned a corner. The CSI 300 Index has rallied 27 per cent from a low reached in September and traders will watch to see if it builds on its gains when onshore markets reopen on Tuesday after a holiday.  

Goldman lifted its target for the MSCI China Index and benchmark CSI 300 Index to 84 and 4,600 respectively, implying a total return of 15 per cent-18 per cent from current levels.