China's asset surge is unstoppable? Goldman Sachs: Many "China concept stocks" have yet to rise

Goldman Sachs stated that although the Chinese stock market significantly outperformed the S&P 500 and European markets in February, the flow of funds has not fully kept pace. Aside from technology stocks, other assets related to China's recovery have performed relatively quietly, which may conceal substantial investment opportunities.

Goldman Sachs analyst Christian Mueller-Glissmann noted in a report on February 24 that despite the impressive performance of the Chinese stock market, the amount of funds flowing into mutual funds and ETFs in the mainland and Hong Kong markets does not align with the positive signals, indicating a disconnect between market sentiment and actual actions.

Further analysis shows that southbound funds, hedge funds, and the inflow of funds into onshore artificial intelligence-themed ETFs have shown a more optimistic shift. This suggests that a portion of "smart money" has begun to take action.

Goldman Sachs indicated that among all Chinese assets, technology stocks are undoubtedly the brightest stars. The performance of the Hang Seng TECH Index over the past six months has been one of the best in its history.

Specifically, information technology (IT) and cyclical sectors have performed outstandingly in H-shares, far surpassing consumer staples, healthcare, and financial sectors. This is driven by both the Chinese government's more proactive support for the private sector and new advancements in the artificial intelligence field, such as DeepSeek-R1.

In terms of individual stocks, Alibaba's 65% increase year-to-date and Xiaomi's 50% increase are particularly noteworthy.

However, it is worth noting that among Goldman Sachs' "China Factor" basket of assets, aside from the Hang Seng China Enterprises Index (HSCEI) and copper, other assets have performed relatively sluggishly. This suggests that the market may be underestimating the sensitivity of these assets to China's economic recovery, which may conceal significant investment opportunities.

Goldman Sachs' China strategy team believes that the rotation model between A-shares and H-shares now predicts better returns for A-shares. The upcoming Two Sessions may confirm a supportive expansionary stance, which will benefit domestically listed companies.

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