While facing challenges, Goldman Sachs (GS, Financial) analysts have a cautiously optimistic outlook on Chinese equities for 2025. In a recent interview, the firm said Chinese stocks are well positioned for limited downside in 2025 due to a number of factors supporting the market.
The analysts pointed out that the risks from trade tensions —particularly between China and the US — have already been priced into the market. They also stressed the need for domestic stimulus measures that will buffer against any possible further sell-offs. The higher probability of more specific policies that would boost consumption also gives market participants hope of recovery.
Goldman Sachs sees MSCI China index earnings growing 7 percent in 2025 and 10 percent in 2026. The firm says equity valuations have pulled back from their October peaks and forecasts that better things in fundamentals will result in stronger corporate performance.
While a 60 percent increase in US tariffs on Chinese goods will be unlikely, Goldman Sachs stated that this would imply a 10 percent valuation downside from its current market level.
There has also been optimism in China's Ministry of Finance plans to increase fiscal spending next year to boost consumption and stabilize growth. The government said expanding domestic demand, supporting key industries, and boosting pensions for retirees are among the supportive moves for the economy and equities in the months ahead.
