Goldman Sachs has trimmed its earnings and market forecasts for Chinese stocks, citing renewed concerns over weakness in the country’s real estate sector, Invest-Gate reports.
The Wall Street firm now expects a lower trading range for MSCI China equities, with its 12-month target declining to 6,700 from 7,000 previously, according to a Monday note from strategists.
This represents around a 13% upside from Friday’s close but reduced growth compared to Goldman’s prior estimate. Earnings-per-share projections were cut to an 11% increase for 2022 versus 14% earlier.
“Enthusiasm following July’s Politburo meeting proved fleeting as the stumbling housing market and potential economic and financial stability risks resurfaced,” the analysts wrote.
This marks Goldman’s second outlook downgrade in three months as pessimism persists over China’s deepening property crisis and shadow banking troubles. The authorities’ measures to boost confidence have been gradual so far, with no major stimulus expected.
While Chinese stocks remain supported by cheap valuations and low investor positions, continued liquidity and growth headwinds limit upside, Goldman said, having made further cuts to profit forecasts on weaker activity.