Chinese Equity Markets Unfazed by US-China Tensions, Goldman Sachs Strategist Says
A Goldman Sachs equity strategist has downplayed concerns over US-China trade tensions, predicting that Chinese stocks will rise by 20% over the next 12 months despite potential tariffs. According to Kinger Lau, chief China equity strategist at Goldman Sachs, the Chinese government will respond to external headwinds by shifting its economic focus towards domestic demand and implementing measures to soften the impact of tariffs.
Lau anticipates that the US will impose tariffs on Chinese goods, increasing the rate by around 20 percentage points this year, but notes that the timing is uncertain. However, he believes that Chinese stocks will be able to absorb the additional tariffs, leading to a 20% rise over the next year.
Regarding earnings, Goldman Sachs expects low-teens growth from Chinese corporates this year, excluding the impact of tariffs. However, after factoring in the potential 20% tariffs, the expected earnings growth rate falls to around 7%, slightly below the consensus forecast.
According to Lau, 10% of the expected 20% growth will come from multiple expansions or multiple recoveries, while 10% will come from earnings growth.