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sing more! international investment bank goldman sachs: top 10 reasons to buy chinese stocks

2024-10-07

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sing more! international investment bank goldman sachs: top 10 reasons to buy chinese stocks

wu juanjuan china fund news

after nearly two weeks of rapid fundraising, global hedge funds have repaired their net positions in chinese stocks. tomorrow, whether a-shares will open with a bang or make mid-term adjustments is undoubtedly a question that attracts much attention.on october 7, international investment bank goldman sachs once again sang bullishly, giving ten reasons to buy chinese stocks.

global hedge funds’ net positions in chinese stocks rise rapidly

goldman sachs stated in its capital flow report on september 27 that according to data from the prime brokerage platform, on september 24, global hedge funds’ net purchases of chinese stocks hit a new high in single-day net purchases. in terms of news, on september 24, the “one bank, one bureau, one meeting” announced a package of policy measures at a press conference of the state council information office to stabilize the economy and the stock market. goldman sachs stated in the same report that the net position of global hedge funds in chinese stocks is located at the 14% percentile over the past five years (the 100% percentile represents the highest allocation position of global hedge funds’ net positions in chinese stocks over the past five years). compared with their own historical levels, global hedge funds were severely underweight chinese stocks at the time.

things change quickly.

in the past two weeks, global hedge funds have been "crazy" to acquire chinese stocks.

on october 4, goldman sachs released a weekly capital flow tracking report that showed significant changes in the net positions of global hedge funds in chinese stocks. in september, chinese stocks (including offshore and onshore stocks) on the goldman sachs prime services platform recorded the largest single-month net buying on record, mainly contributed by h shares, followed by a shares, and finally american depository receipts (adrs). net purchases of h shares accounted for 47% of the total net purchases, net purchases of a shares accounted for 29%, and net purchases of american depositary receipts accounted for 24%.

at the same time, global hedge funds’ net positions in chinese stocks have risen rapidly. according to the historical quantile, the net position of global hedge funds in chinese stocks rose from the 14% historical quantile to the 55% historical quantile. that is, the current net position of global hedge funds in chinese stocks is near the historical median (50%) over the past five years. the speed with which hedge funds rush to raise funds is evident.

looking over a longer period of time: the net position of global hedge funds in chinese stocks reached a high in mid-2020. at that time, chinese stocks accounted for more than 15% of the global hedge fund portfolio; subsequently, this value continued to decline, and by early 2022, to a staged low. at that time, the net position portfolio of global hedge funds in chinese stocks accounted for less than 7%; in november 2022, china adjusted its epidemic policy, and hedge funds quickly accumulated chinese stock positions. by the beginning of 2023, the net position of global hedge funds in china the proportion of the portfolio exceeded 13%, reaching a historical high; subsequently, the net position of global hedge funds in chinese stocks continued to decline. for a long time before september 23, the proportion of chinese stocks in the global hedge fund portfolio was historically low. it hovered in the low range (less than 7%); after september 24, the situation quickly reversed, and the proportion of chinese stocks in the global hedge fund portfolio rose linearly to 9.8%, which was the 55th percentile in the past five years.

to put it simply, the current proportion of chinese stocks in global hedge funds’ portfolios is still significantly lower than the periodic high in mid-2020, and also lower than the periodic high reached after the epidemic was relaxed in early 2023.

goldman sachs: top 10 reasons to buy chinese stocks

on october 7, after goldman sachs raised a shares to overweight, it issued another report calling on chinese stocks. in a report, goldman sachs gave the top ten reasons to buy chinese stocks.

first, the government has stated its “pain point threshold” for economic growth and the stock market, and the policy bottom has been reached. secondly, from the perspective of policy measures: this time is indeed different. investors largely got the stimulus measures they were looking for. third, don’t fight china’s central bank, which is providing unprecedented and extraordinary support for the stock market.

fourth, although the risk of a correction may increase after the stock market rises 30% in two weeks, stock revaluation transactions triggered by policy shifts rarely end abruptly after a 30% rise. fifth, even in long-term weak markets, strong tradable rallies can occur. sixth, from a valuation perspective, there are still reasons to buy chinese stocks.

seventh, the fear of missing out (fomo) may continue. the transfer of funds from developed markets to emerging markets is ongoing. eighth, although more stimulus measures may be needed to turn the situation around, the profit prospects of china's listed companies have improved. ninth, after the federal reserve cut interest rates, china's policy space has been further opened. subsequent external risks may prompt policymakers to increase stimulus measures. tenth, taking a step back, even if the market fails to reverse in the medium to long term, the chinese stock market should still have a place in investors' portfolios.

prefer a shares to h shares

based on updated earnings growth and reasonable valuation assumptions, goldman sachs raised its target prices for the msci china and csi 300 indexes in the next 12 months to 84 points and 4,600 points respectively.compared with the closing price on october 3, the msci china index and the csi 300 index have room for growth of 14% and 15% respectively.

in the asia-pacific (excluding japan) market, goldman sachs raised its rating on chinese offshore stocks to "overweight" based on the expected return of the msci china index over the next 12 months. after adjustment, in the asia-pacific (excluding japan) market, goldman sachs holds an overweight view on markets such as china's offshore stocks, china's a-shares, india, south korea and indonesia.

at the same time, goldman sachs said it tactically prefers a shares to h shares. mainly due to the following reasons: a-shares have more directly benefited from the central bank’s support measures for the stock market, the participation of domestic retail investors may continue to rebound, and a-shares have fallen 7% relative to h-shares in the past three months. goldman sachs said that its ah market rotation framework model believes that a shares will moderately outperform h shares in the next three months.