Goldman Thinks China Stocks Can Jump Another 25%
China Coal Imports Set To Soar
Goldman Sachs is bullish on Chinese equities, saying they may rise another 25% before the end of this year as the promise of the Yuan appreciating may enable China to bring an end (at least for the near-term) to monetary tightening. China’s tighter monetary policy has been a drag on Chinese equities and related exchange traded funds this year as has Beijing’s efforts to cool China’s scorching real estate market. Now that down payment requirements have been significantly raised, the housing market may start to cool and that could be a help to Chinese stocks.
Certainly an end to the strict monetary policy China has employed recently would be a boon to stocks in China and probably several other markets as well. Goldman said other equity markets in the region may benefit as the Yuan appreciates. For now, the Shanghai Composite Index is still about 9% on the year and is among the world’s worst performing benchmark indexes.
On the bright side, Goldman did say the ”risk reward pretty good” while adding Yuan appreciation “is a powerful signal for people to become more constructive on equities.” Goldman also noted the CSI 300 Index, which tracks stocks listed in Shanghai and Shenzhen, may fall to 2,900 before reaching 4,000 by the end of this year. The index currently trades around 3,200.
We continue to recommend the Claymore/AlphaShares China SmallCap ETF (NYSE: HAO) as one of gaining China exposure and would be buyers on any dips. Another interesting candidate to play China on a regional basis is the WisdomTree Emerging Markets Small-Cap Dividend ETF (NYSE: DGS), which has exposure to Taiwan, South Korea and Thailand, all of which benefit from China’s strong economy.
