Goldman Sachs: Being bearish on Hong Kong shares and downgrading the rating to "reduce", while being more positive on the mainland stock market.

Goldman Sachs issued a research report on Asian stock markets in 2025, downgrading the rating of Hong Kong stocks to "underweight" while maintaining a "overweight" rating for Mainland Chinese stocks. They predict a target price of 75 points for the MSCI China index by the end of next year, and 4600 points for the Shanghai and Shenzhen 300 index, corresponding to forecasted price-to-earnings ratios of 11 times and 14 times, with potential gains of 15% and 13% respectively. This is mainly driven by expected corporate profit growth of 7% to 10%, as well as moderate valuation increases. However, Goldman Sachs predicts weakening performance in Hong Kong company stocks within the MSCI Hong Kong Index. Goldman Sachs indicates that although the valuation of Hong Kong stocks is not high, the economic and profit growth potential in Hong Kong may be limited, and the real estate and retail industries still face pressure. Overall, Goldman Sachs prefers A-shares over H-shares due to the higher sensitivity of A-shares to loose policies and retail investor capital flows. In terms of sectors, Goldman Sachs recommends a portfolio emphasis on the consumer industry, and has upgraded healthcare stocks and brokerage stocks to "overweight", expecting funds to come from traditional cyclical industries. The bank highlights government consumption, emerging market exporters, select new technology or infrastructure alternatives, while also advocating for an income strategy to capture potential policy dividends.