Twice a week, raising the target price for the Chinese stock market! Goldman Sachs: The CSI 300 still has 17% upside potential

Trade easing drives market rebound, Goldman Sachs raises target price for Chinese stocks twice in a week, returning to pre-April 2 forecast levels.

According to news from the Wind Trading Desk, due to better-than-expected tariff negotiation outcomes, as of May 14, the Chinese stock market has fully recovered the losses incurred before April 2, with the MSCI China, CSI 300, and Hang Seng Tech Index rising 2-4% from early April highs.

Accordingly, Goldman Sachs maintains an overweight rating on Chinese stocks and adjusts the 12-month target price for the Chinese stock market back to pre-April 2 forecast levels, with target points of 84 and 4600 for MSCI China and CSI 300 indices, implying upside potentials of 11% and 17%. Previously, Goldman Sachs economists raised GDP growth expectations for the U.S. and China.

It is worth mentioning that this is the second time Goldman Sachs has raised the index target in less than a week, having previously lowered the target price twice in early April due to mutual tariff imposition.

Tariff reductions drive market recovery, stock market regains ground lost since April 2

According to the Ministry of Commerce, on the 12th, the U.S. and China canceled a total of 91% of the additional tariffs and suspended the implementation of 24% of counter-tariffs. This reduction exceeded market expectations, and the Chinese stock market has fully recovered the 13% decline since April 2.

Goldman Sachs stated that as of the close on May 14, the Chinese stock market had fully recovered the losses after April 2, with offshore market stocks and onshore market stocks recovering 13% and 7% of their declines, respectively. The MSCI China, CSI 300, and Hang Seng Tech Index are now up 2-4% from early April highs.

From a sector performance perspective, hardware technology, industrial, and consumer sectors led the gains, with emerging market exporters and domestic beneficiaries performing prominently. In contrast, healthcare, U.S. exporters, and government spending-related stocks lagged behind. Year-to-date, the Chinese offshore market remains one of the best-performing stock markets globally, with a rise of 17%, while the MSCI Emerging Markets (excluding China) and developed market indices rose by 6% and 3%, respectively.

Economic growth expectations raised, stock market targets adjusted to pre-April 2 levels

In light of the better-than-expected tariff reductions and the easing financial environment in the U.S. over the past month, Goldman Sachs' economic research team has made several forecast adjustments:

1. For the U.S.: The growth forecast for 2025 has been raised by 0.5 percentage points to 1% (quarter-on-quarter annual rate), while the probability of recession within 12 months has been lowered to 35%. The timing of the Federal Reserve's interest rate cuts has been pushed back, now expected to begin at the December FOMC meeting, with three cuts of 25 basis points each at every other meeting, rather than the previously predicted continuous cuts starting in July.

2. For China: The actual GDP growth forecasts for 2025 and 2026 have been raised, while the degree of monetary and fiscal policy easing may be slightly lower than previously expected Goldman Sachs expects that the MSCI China and CSI 300 indices will reach 84 points and 4600 points respectively in the next 12 months (up from previous forecasts of 78 points and 4400 points), which is almost completely in line with expectations from early April, indicating potential upside of 11% and 17% respectively.

Goldman Sachs believes that the internet and service industries will benefit from the recovery in consumption and the acceleration of digital transformation. At the same time, during the policy easing cycle, the valuation recovery of quality regional banks and leading real estate companies is expected. In sectors benefiting from policy stimulus, the infrastructure industry chain, including building materials, construction machinery, and new energy vehicles, is expected to consolidate its development momentum.

Focusing on the theme of structural growth, Goldman Sachs recommends paying attention to selected AI industry chains, such as computing power infrastructure (GPU servers, optical modules), vertical scenario applications (intelligent driving, industrial software); emerging market exporters, such as leading manufacturers expanding into ASEAN and Middle Eastern markets; as well as high-dividend state-owned enterprise reform targets and consumer blue chips with increased share buyback efforts related to shareholder return enhancement