Gotta Have Faith

Image source: Goldman Sachs

What's going on?

Strategists at Goldman Sachs have a whole lot of confidence in China’s stocks.

What does this mean?

The Chinese stock market started the year with a bang, buoyed up by investors’ high hopes for the Red Dragon’s grand reopening. But that party screeched to a halt late last month, as the country’s Covid resurgence and escalating tensions with the US triggered a mini selloff. That worried some observers, but not Goldman Sachs: the firm thinks China will continue to regain its moxie as time goes on, and it believes that consumer areas – like the service sector, which still isn’t anywhere near its pre-pandemic health – stand to grow the most. What’s more, experts think the government’s gearing up to announce some fresh new growth policies, which could be why the Wall Street firm reckons the MSCI China Index will be cruising 24% higher at the end of the year.

Why should I care?

The bigger picture: Nifty numbers.
It looks like China could finally be putting a lid on Covid too: data out last week showed that the country’s mortality rate has dropped off a cliff, plunging so quickly that some skeptics are casting doubt on the numbers. But if the figures are bona fide, they bode seriously well – so much so that you might want to keep an eye on oil prices. See, analysts at Vanda Insights predict that China’s demand for oil will return to pre-pandemic levels next quarter, which could send prices skyward.

Zooming out: China’s danger zones.
“The world’s manufacturer” might have its production lines whirring again, but China should be careful where it locates its industrial might from now on. A study out on Monday showed that China’s home to 16 of the 20 regions that will be worst affected by climate change. With many industrialized areas on the line, the country could end up having to rebuild whole regions or build out in different areas altogether.

Originally posted as part of the Finimize daily email.

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